[00:00:04] Ray Latif: Hello, and thanks for tuning in to episode 78 of Taste Radio Insider. I'm Ray Latif, the editor and producer of Taste Radio, and I'm with my BevNET and Nosh colleagues, John Craven, Mike Schneider, and Melissa Traverse. In this episode, we're joined by Hilary McCain, the founder of CBD-infused sparkling water brand Sweet Reason. Just a reminder, if you like what you hear on Taste Radio, please share the podcast with friends and colleagues. And of course, we'd love it if you could review us on the Apple Podcasts app or your listening platform of choice. We've never gotten someone to say they don't like what they hear on Taste Radio. So I'm assuming if you do like what you hear on Taste Radio, which is always, you should always be sharing the podcast, right?
[00:00:43] Sweet Reason: Right.
[00:00:45] Ray Latif: I mean, it's just, it's common sense. It's logic. It's rational. There are those people, Ray, whose parents taught them, if you can't say anything nice, don't say anything at all.
[00:00:56] New York-based: There you go.
[00:00:57] Ray Latif: That's a Ken Sadowski line. Maybe I'm just feeling the effects of yesterday because yesterday, as of the day of this recording, was National Cocktail Day. That's March 24th. Did anyone have a cocktail yesterday? That's like every day in my house. National Cocktail Every Day.
[00:01:11] Sweet Reason: I discovered my favorite cocktail is a Boulevardier.
[00:01:14] Ray Latif: Good stuff. What's in a Boulevardier?
[00:01:17] Sweet Reason: Well, actually, I like a twist on the Boulevardier, which is bourbon, amaro, and Cocchi Americano. But I think, John Craven, typically, is it made with Campari?
[00:01:28] Big Geyser: Yes.
[00:01:29] Ray Latif: Rive, vermouth, or sweet vermouth and Campari. Delicious. I like how you address John as John Craven. That's something I do. I think you're the first person to do that.
[00:01:38] Big Geyser: I wouldn't have responded if she didn't say that.
[00:01:40] Sweet Reason: Yes, I always want to do that. Why not?
[00:01:44] Ray Latif: I had yesterday a Tip Top cocktail. Tip Top's a maker of canned cocktails. They make some pretty outstanding stuff. I had the Negroni variety, which was pretty tasty. Good stuff.
[00:01:57] Big Geyser: I'm just going to keep saying good stuff when we're talking about cocktails.
[00:02:00] Ray Latif: We celebrated National Cocktail Day with a little Instagram Live yesterday. John Craven actually made a cocktail live on his Instagram. I did as well. Oh, I missed that.
[00:02:09] Sweet Reason: Mike, what was your cocktail that you made?
[00:02:11] Ray Latif: I made a white Negroni, also known as a, I think it's called a white ghost or a clear ghost.
[00:02:18] Sweet Reason: And what goes into that?
[00:02:19] Ray Latif: I made it with gin and Cocchi Americano and the Luxardo white, is it a liqueur, Craven?
[00:02:28] Big Geyser: Yes.
[00:02:28] Ray Latif: John Craven. Yes, Mike Schneider. It's a maraschino liqueur. That's what it is.
[00:02:37] Big Geyser: Tasty.
[00:02:38] Ray Latif: Tasty. Well, I had my cocktail at my desk at home, and this is week two of me working from home. And I can imagine that it's week two or three for most folks listening to the podcast at this point. And I'm looking around at my home office set up. And I think it's better than most, but it's getting kind of messy. I have stuff everywhere. As I was mentioning to you guys, I'm pulling out stuff that I've hoarded over the last year or so in case I need it, like supplements and food products. I have some CBD oil hemp gummies that I hoarded from Expo West 2019. and I found these. And even though they're expired, these are February 2020 is when they expire. I've been chewing on these and it's been nice, but it's just everywhere. How are you guys managing your home offices? Or do you have a home office?
[00:03:24] Sweet Reason: You know, everybody has been sharing the schedules that they're using and all of these tips for self-care and staying centered. I have to admit, it's It's a disaster over here. My husband is a healthcare worker and so for a portion of the week, I'm on my own over here. So parents are homeschooling their children around the calls that they have. I'm just taking it hour by hour over here.
[00:03:50] Ray Latif: Mike, how are you managing? You have three kids. Yeah, I do. You know, the kids are on schedules. They've got a little bit of schoolwork to do. They're, you know, doing the things that we're doing. They're on Zoom or they're on, you know, Minecraft servers with their friends or, you know, just trying to keep busy. One of them's learning how to code. Another one's learning how to use Illustrator. Trying to learn some skills here, Rae.
[00:04:14] Sweet Reason: Lighting fires in the kitchen.
[00:04:15] Ray Latif: Unless we're not having a kumbaya here, no.
[00:04:18] Sweet Reason: We're staying centered and sane over here completely.
[00:04:23] Ray Latif: Yeah, like Jackbox games things like that, you know things that that you can do online or do with friends or So that's kind of what's going down. Jeez, it sounds like you're cracking the whip over there. Well done.
[00:04:34] Sweet Reason: Yeah, I know.
[00:04:35] Ray Latif: Yeah. John, what are your kids behaving?
[00:04:38] Big Geyser: For the most part, I think they've been sort of staying out of my hair, which is good. We Have a small home office and I think, yeah, just trying to keep neat and organized. And I guess I'd say, you know, stay on a schedule and I'm not worried about like, you know, the daily schedule beyond just getting up and
[00:04:57] Ray Latif: I don't know, taking a shower, eating breakfast, getting a little exercise, you know, keep it simple. Every day is a little different. I mean, I like keeping it simple. It is sometimes difficult when you're working from home if you do have other people in the house. Usually when I'm working from home and it's just me, it's not a problem. But I mean, staying focused is like critical for me at least to getting through all this. And, you know, I go back to the episode we did with Mark Rampolla, who's the founder of Zco Coconut Water and one of the co-founders of Powerplant Ventures, the plant-focused venture capital firm. We talked a lot about goals and creating daily goals for yourself that tie into other short-term and long-term goals. I found that really compelling. It's something I try to incorporate into my daily schedule every day. We've been talking to founders and it's been interesting to hear what they're doing to keep their work life balanced because this isn't really anything new for them. They're used to working a lot of hours to keep things going. Yeah, I think one of the other challenging things about this is when you're in the office, you know, you meet in the kitchen, you're meeting by the water fountain, well, I'll call it the, it's not really a water fountain in our office, the water dispenser that dispenses lukewarm, cold and sparkling water, which is always very nice. It's a great place to just bounce ideas off each other. And we don't really have a virtual water cooler.
[00:06:18] Sweet Reason: Absolutely. Something I found really helpful in staying connected is just randomly having video chats, even if it's just for a few minutes so you can see people's faces. I find that oftentimes the best ideas come out of random conversations that you didn't mean to have. So reinstituting that opportunity to have a conversation with someone, even if it's outside of a meeting, is really important because you never know what you'll come up with.
[00:06:45] Ray Latif: One of the other things I've heard from a lot of brand owners is that they're trying to shift their resources to online marketing. And while that sounds good, and it sounds like a great approach to handling the current situation, it's not necessarily the easiest thing to do. You've got to create content that's really useful and meaningful. And how you do that in a way that doesn't come across as inauthentic
[00:07:10] Sweet Reason: Absolutely. And our news team covered this on our site. CC's was previously focusing on their new ready to eat ramen, but now they'll be transitioning their online marketing to more cooking content. So a video series and blog posts explaining how and why to use their products since folks have so much more time at home to experiment.
[00:07:32] Big Geyser: And it's tough, I think, in that right now there's so much of that, like literally everyone's doing that, right? So, you know, you see companies that are in like, I don't know, the fitness world, like they're putting out, you know, home workouts and there's a lot of kind of like DIY stuff out there that I think is, you know, starting to become a little overwhelming maybe. I guess I'm curious to see how that kind of works out for a lot of these companies in our space that are doing it. where at some point, I think people just probably want to hear about the product too.
[00:08:06] Ray Latif: It's almost going to create kind of the reverse problem. The big problem is that nobody's had a chance to prepare for this. Nobody had a disaster plan in place for what happens when everybody goes on lockdown. What kind of content are we going to make? So you have a lot of brands that are scrambling to create that content and it's just not scalable at this time.
[00:08:24] Sweet Reason: And, you know, sometimes just simple is best. I've seen posts from Health Aid and Harmless Harvest, ideas to stay sane, thanking health care workers, retail grocery folks. And then there are brands like Core Foods who are just sharing positivity and doing giveaways in addition to promoting the things that they've always been working on. You can't go wrong with simple messaging like that.
[00:08:47] Ray Latif: If you're a founder who's stressed about what to do right now, that kind of content isn't going to make or break you as a brand. I think it's important to connect with your consumers right now and to put something simple out there, but there isn't going to be one piece of magic content that everybody spreads around right now. I mean, trying to go viral right now isn't the goal. It's just to connect with your consumers.
[00:09:08] Los Angeles: 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.
[00:09:28] New York-based: Tune in at the end of this episode for an exclusive interview with Matt Lin of Belay Solutions. He sits down with Melissa Traverse to break down the biggest inventory and accounting mistakes CPG founders often make. You'll learn how to bring clarity to your numbers so you can scale with confidence.
[00:09:46] Ray Latif: Last week, we asked folks to reach out to us about their brands, how they're doing, and we got a lot of great responses. We heard from a longtime listener, Dave Colina, who's the founder of O2, which is a pretty fast-growing brand of sports recovery drinks. And right now, he's pledged to donate 50% of profits from the company to support independent gym owners during the shutdown. And I think that's exactly what we've been talking about, doing something that's really helpful to folks during this situation and authentic to his brand.
[00:10:22] Sweet Reason: I've had a couple of really nice conversations with emerging food CPG brands. One of them was with a woman named Movitza from Smooth Pops. She's based out of New York City, and she has a frozen Smooth Pops brand. So it's smoothies in popsicle form that don't have any gums or binders. We had a really nice conversation, and she's working on getting things off the ground. I also spoke with Jordan from Baaz Bites. Baaz Bites is a frozen brand and it's crispy Persian rice rounds, but very similar to when you make that crispy rice and the bottom gets all delicious and crunchy. Bibimbap. Yes, it's like the Persian bibimbap. So it's these tiny rounds of crispy rice. And then he also sells frozen stews like fesenjan, gourmet sabzi, things to put on top of the crispy rice rounds. And he's also working on getting things off the ground and gaining more consumers. So it was a real pleasure to chat with both of them.
[00:11:28] Ray Latif: All right, I think it's time to get to our featured interview for this episode. As I mentioned at the top of the show, Hilary McCain is the founder and CEO of Sweet Reason, a brand of CBD-infused sparkling waters that are promoted as nature's logic in a bottle. Launched in 2018, the brand is aligned New York-based distribution heavyweight Big Geyser and sold in hundreds of chain and independent retailers in the metro market. The company has also attracted a number of influential investors and advisors. In July of 2019, Sweet Reason raised $2.5 million in a seed round led by venture capital firm Lever Hippo and recently brought on veteran beverage executive Hal Kravitz to support its continued development. In the following interview, I spoke with Hilary about how her interest in cannabis led to the launch of Sweet Reason, her perspective on beverages as the best delivery format for CBD, and how she navigates the tightrope of functional claims. She also discussed strategizing for the future despite an unclear regulatory environment, and how she framed her pitch to investors. Hey folks, it's Ray with Taste Radio. I'm on a call right now with Hilary McCain, who's the founder and CEO of Sweet Reason. Hilary, how are you?
[00:12:44] Lerer Hippeau: I'm great. How are you, Ray?
[00:12:46] Ray Latif: I'm doing pretty good. Pretty good. So Sweet Reason, I know the brand. I'm familiar with it. So for folks at home who are not, can you tell us a little bit about what it is and how you got started?
[00:12:57] Lerer Hippeau: Yeah. Sweet Reason is a hemp and cannabis beverage company. We launched with a line of CBD sparkling waters about a year and a half ago now in New York. We started out in New York. And since then We Have grown and expanded into LA as well. So we're in over 300 accounts in New York and LA. And I started the business back in the summer of 2017. The idea really came to me. I was working in the food industry before Sweet Reason and living in Toronto. And I saw all of my mentors and advisors start leaving the food industry and getting into the cannabis industry. And as I started to think more about cannabis legalization, because the recreational legalization of cannabis was on the horizon, it ended up happening in October of 2017. It became clear to me and to many others that beverage was really the highest potential and future part of the cannabis industry. I'm a firm believer in really the notion that beverages are a core part of our society and how we socialize. You think about it, we like meet up for a coffee. or a drink or a tea or take a break and go get a Sweet Reason. And so I always really thought that beverages were the right format to normalize cannabis and to take away the stigma of cannabis. And then furthermore, I always believed that a great brand was what would really take away the stigma of cannabis and, and, you know, make it look like something that could be a part of a healthy person's every day or weekly life. So that's how I, that's what initially inspired me to get into the space. And then. And then I discovered CBD and all the health benefits of CBD and that I could legally extract CBD from hemp. And it was the same as CBD extracted from cannabis. And I basically became obsessed with CBD as an ingredient and for my own personal use and the daily bouts of anxiety that we all get. But when I looked around at all of the brands on the market at the time, there really weren't any that appealed to me as a millennial woman, and no products that really met the health and wellness standards that I typically hold all packaged goods to that I consume. And so for me, that was no sugar, sweeteners, and simple ingredients. And so I started Sweet Reason, again, first with CBD sparkling water that has no sugar, sweeteners, and simple ingredients. And we decided to build a beautiful brand that really represented something bigger than CBD, And of course, as I said, CBD is really just the beginning for us. We are super passionate about all parts of the hemp and cannabis plants. And as they become legal and science backed, and as our consumers seek to incorporate different parts of both plants into their lives, Sweet Reason will offer a broad range of products in the beverage space in particular.
[00:16:12] Ray Latif: You said a lot there and I want to unpack everything you said. I want to go back to your experience in the food industry. You'd previously worked for Chobani.
[00:16:21] Sweet Reason: Yeah.
[00:16:21] Ray Latif: You also got your MBA from Harvard. You worked at Boston Consulting Group, which is a revered consulting firm. It seems like you had a pretty clear path to corporate leadership, but clearly you're more interested in running your own company. Why?
[00:16:38] Lerer Hippeau: I think I always wanted to do something entrepreneurial. I always wanted to be my own boss. I always had my own ideas. I would say mostly I find entrepreneurship to be the most creative part of business. And I think a part of me wanted to exercise some creativity. and sort of be in a business that can move fast, where I had control over the brand and the product. So that was always appealing to me. Having said that, I wasn't necessarily in a place where I was like, Oh my god, I really want to start a company or a beverage company. And that I was fully aware of how difficult startups can be. But I would say the opportunity with hemp and cannabis beverages and CBD beverages in particular, was so clear to me and the potential of the products was so clear to me and something I was always really passionate about. Mental health and anxiety are both topics that I'm super passionate about. So the fact that We Have these two plants that have been illegal to study and to consume for so many years and that they are all of a sudden coming onto the market and all of a sudden consumers can access their health benefits. That was like an once in a generation opportunity to me. So I jumped right in. We were initially based in Toronto and we were supposed to launch the business in Toronto. I started Sweet Reason from my hometown, which is Toronto, and we were keen to launch it here. And a month before our first production run, I got a call from my lawyer who told me that CBD was actually not going to be carved out of the Cannabis Act as expected. and would not be allowed in food and beverage in grocery stores as opposed to in dispensaries.
[00:18:25] Ray Latif: And then you ran into the same problem in New York City.
[00:18:28] Lerer Hippeau: Well, it was crazy because this was summer of 2018. It was like July 2018 or June 2018. And within the same 48 hours that Canada announced that they were not going to carve out CBD from the Cannabis Act, the U.S. announced and Mitch McConnell announced that they were going to pass the Farm Bill. And so, you know, most of my competitors in Toronto and in Canada closed the doors and returned money to investors. We decided to pick up and launch the business in New York, but that obviously was starting from scratch. We had to find all new suppliers, a totally new manufacturer, a new team, new supply chain, everything from scratch. It was amazing. It was obviously a time where I was super proud of my team for their resilience. And we were able to quickly turn around and have our first production run with a manufacturer in November of 2018. And we were on shelves in December of 2018 in New York. So it was a crazy year, but it definitely shows you that with the right team, you can do anything and handle any challenge.
[00:19:34] Ray Latif: You said you became obsessed with CBD and in particular CBD beverages amid the sort of wild west of CBD and cannabis. There are a lot of different claims out there about the benefits of each ingredient. Do you have to become an expert in the ingredient to sell it? Did you have to become an expert in both CBD and all aspects of cannabis before you felt comfortable launching a brand like this?
[00:20:00] Lerer Hippeau: I would say you obviously need to do your due diligence, especially if you are looking to get into the space with a premium product and a premium brand, which was what I always intended to do. There's a lot to learn in the CBD space in particular. We spent over a year developing this product. We Have a list of over 80 different CBD suppliers in North America, and a very extensive criteria to even welcome their samples into our doors. And then after that, there's so many quality tests, there's so many taste tests. So yeah, you do need to become an expert. You also need to hire the right people that know what they're doing. In the early days, there were not that many people from the food industry in the CBD beverage space. Now, it's definitely changed. But there were things that we expected of CBD suppliers that they couldn't offer us. And we found ourselves in many cases, holding the bar higher for them. So yeah, I definitely think you need to become an expert. You need to care about quality. if you're going to bring a product to market that works and is effective and that is up to the standards that consumers expect.
[00:21:17] Ray Latif: But consumers don't necessarily know what they want at this point, do they? I mean, it requires a lot of education, a lot of awareness building on the consumer end of things to really understand why they should even use CBD. And that sort of lends itself to a question of how much CBD do you need in your product? So, I mean, how did you determine and evaluate the CBD content per bottle of Sweet Reason?
[00:21:45] Lerer Hippeau: It was a lot of trial and error for us, and it should be a lot of trial and error for consumers. I like to say CBD, you can compare it to so many different things in the nutraceutical space that really help you understand what it is and how it works. My favorite example is caffeine. If I have a cup of coffee or two in the morning, I am like wired and need to go for a run to burn that off. Some people can have five cups of coffee. Some people can have a cup of coffee like, you know, one day, but the next day they don't need it or they can't have it. So like coffee, CBD really affects everybody differently. And there's a broad range of how much people can tolerate, how much people need to, in order to have their desired effect. And then you get to what is their desired effect. That also has a broad range. Some people want to feel slightly calm throughout their day and focused. Our consumers want to feel calm and focused. And so we designed a product that has 10 milligrams of hemp CBD. It's pure hemp CBD from organic Colorado hemp. And that is the right amount to help people feel calm and focused. If you have bigger issues, for sure, there is a world in which you might want to take more CBD for a different type of health issue or for a different type of effect.
[00:23:26] New York-based: 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 e-book 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. Do you need to scale your team faster without compromising on talent? Join Oceans for a live webinar on April 20th and learn how leading companies are hiring top global professionals who are ready to grow with your business. Register for the webinar now at Taste Radio slash oceans. That's Taste Radio slash oceans.
[00:24:12] Ray Latif: The benefits you listed, you know, sleep, reducing anxiety, focus, these are all functional claims that are difficult to prove at this point for CBD. There haven't been many clinical trials at this point, to my knowledge, that can confirm those functional benefits. That makes promoting them kind of a tightrope or at least walking a tightrope. You know, how do you navigate that path?
[00:24:38] Lerer Hippeau: I would say we focus mostly on things that we can say. We talk about CBD and the effects of CBD and the effects of Sweet Reason as it helps you stay calm and focused. Those are our two grounding benefits that people relate to and that I think are accurate. And the reason why they're accurate is because and why I think they're helpful in particular focus is because sometimes people think calm and they're like, you know, I don't want to be calm at work, I want to be productive. But actually, when you're calm at work, you you are more productive, you are more able to focus. And when you're calm in the evening, you are, you know, you have less going on in your mind, and you are able to fall asleep. So we actually don't talk about sleep that much. And that's because In our experience, CBD only makes certain people fall asleep. It's definitely not an effect that I think is across the board. I would say that that's almost a result of the fact that it makes you feel calm. It doesn't necessarily put you to sleep.
[00:25:40] Ray Latif: Well, I just chewed on some CBD gummies before our interview, and I'm hoping I don't fall asleep. I shouldn't fall asleep. Although each one of these had a 28 milligrams per, per gummy. And I had both, but I don't know if I should have done that.
[00:25:55] Lerer Hippeau: I mean, the other, the other thing to note is that different form factors, gummies, beverage, oils have different bioavailability. around them. And I can't even comment on other beverages, but I know that bioavailability was something that we really focused on from the beginning. So bioavailability is essentially how much and how or how well CBD absorbs in your system. My favorite analogy with this is when you have a glass of wine or alcohol, and some people feel like a little tipsy from that and some people feel nothing, that is the bioavailability of the alcohol in your body. And similarly, CBD has different bioavailability for different people. And it has different bioavailability based on just basically like how well it absorbs in your system based on how you in beverage, how you make it water soluble, or whether or not you focus on the water solubility. So at Sweet Reason, we use something called a micelle technology, It essentially wraps the oil particle that is CBD in a water-soluble solution, and it helps it actually absorb better in your system. And it has improved bioavailability in other nutraceuticals, the micelle technology in particular. So we had great feedback from consumers. We get feedback from consumers all the time, even at 10 milligrams that they, you know, Sweet Reason makes them feel calm, and then it helps them get through their day. And I mean, what more can you ask for?
[00:27:26] Ray Latif: One of the best quotes that I heard about your product, and I think this is your quote, is that CBD is like a beautiful park bench for a distracted brain. I love that. But you know, it's interesting because you said CBD, you didn't say Sweet Reason. So I wonder, I mean, how much of what you're selling is an ingredient versus the beverage?
[00:27:46] Lerer Hippeau: I mean, of course, we're selling the beverage and the brand. Beverage is inherently a brand-heavy industry. But we don't shy away from talking about the ingredient. We're super proud of the CBD that we've picked for our beverage. And we really focus on quality at Sweet Reason. And we try to communicate that to consumers and to educate consumers. So we definitely also talk about CBD and think it's important for consumers to be educated on CBD.
[00:28:14] Ray Latif: Let's talk about folks that aren't necessarily familiar with the benefits of CBD or hemp. There seems to be a high acquisition cost to educate those consumers. Do you go after those folks or are you focused on the people that have a base knowledge of the ingredient and how to use it in their everyday lives?
[00:28:32] Lerer Hippeau: We are definitely focused on educating consumers. We are not only looking for people that already know what CBD is and how to use it. There are so many people that could use CBD in their lives and that are interested in CBD. And what's really interesting is it's not just like the health conscious millennial woman that is into every new age ingredient that is consuming CBD. It is not just millennials that are consuming CBD. There are people across the country, not just on the coast, that are ordering Sweet Reason, that are interested in CBD, that feel the health benefits. you know, we target one consumer, but I would say we joke that we definitely have this like, you know, 60 plus year old man consumer that tells us that CBD helps with their golf game because they can stay calm and focused. So I think that the benefits of CBD are pretty broadly applicable and attractive to so many, so many different people and so many different consumers. And So we really want to focus on educating people about that and not have such a narrow focus on people that are already using CBD or cannabis in their lives.
[00:29:42] Ray Latif: The CBD beverage segment is still evolving. It's an emerging segment of the industry. It's still very unclear where it's going and where it's going to be in a year from now, five years from now. How do you strategize for the future when the category or how the category will play out is still very unclear? The regulatory environment is very unclear.
[00:30:04] Lerer Hippeau: I would say we are very focused on choosing the right partners in order to grow. Uh, so we, we just launched with Big Geyser in New York, uh, and with led in LA. And I think that as we all know, and in beverage distribution is, uh, really the key to success, of course, alongside a great brand. So as a result, like we were, you know, working towards those contracts, those relationships for a while. And we're so thrilled to finally be launching with them, you know, in Q1 of 2020. But beyond that. I think that there is always opportunity for differentiation in this space based on the brand that you're building. So, you know, of course, in five years there will be, and even sooner, there's a proliferation of CBD beverages, but not all brands are created equal and not all brands resonate with the same people. So people love Sweet Reason because we are really focused on building a brand that's around being curators of calm. It's never been more relevant than in today's day and age and in the last couple weeks. And curating all of this calm lifestyle, I think, is a core part of our brand. And CBD really fits into people that want to choose that lifestyle really well. In my mind, CBD is in the same industry as or in the same trend as meditation, mindfulness, self-care, that whole industry and that whole trend is really where the lane that we're playing in.
[00:31:39] Ray Latif: Partnerships clearly important as you mentioned, production partners, ingredients sourcing suppliers. And as I mentioned, you know, the future is still pretty unclear for CBD. How do you find the right production partners? How do you lock in those contracts?
[00:31:53] Lerer Hippeau: I think it starts with your own team and your own people and choosing the right people. My first hire was an amazing COO who was the head of operations for a Canadian nutraceuticals company for over 30 years. And so she is, I would say, constantly teaching people, raising the bar, and showing people the ropes, and really has a higher bar for quality than anybody I've met in this industry, almost. So I always joke, anything gets past Tara, then I'm good with it. But no, I think you really have to create your own standards in this space, both for suppliers and, of course, manufacturers as well. Although the manufacturers that we are all using are from the food and beverage space. And so as long as they are willing and eager to produce CBD beverages, then they are definitely more than capable. We were lucky enough to find a great manufacturer that we've had been working with now for over a year and a half. And that relationship was hard to find in many ways. It was hard to find a manufacturer that could do our bottle, our glass bottle, and our cap, et cetera. So once we found it, we were thrilled.
[00:33:13] Ray Latif: Let's talk about the reason that you went with a sparkling water product. There's a lot of different CBD beverage brands that pop up every day. We're seeing established brands introduce CBD infused SKUs. What was the idea behind launching a sparkling water? Why was that the right beverage and delivery method for Sweet Reason?
[00:33:33] Lerer Hippeau: So when we thought about building the product and creating this product, I mean, first of all, I was really thinking about creating a product that I would personally consume all day, every day. And that was both on the flavors, on the health profile, as I mentioned, with no sugar, sweeteners, simple ingredients and five calories. And then also, you know, I love sparkling water. So it was a natural choice for us. Obviously the sparkling water space has exploded over the last five years and consumers know and love sparkling water and have really grown to incorporate into their everyday lives. So we wanted to take what is a pretty unfamiliar ingredient for people, which is CBD, and bring it to them in a beverage that they already know and love, which is sparkling water. And so we were really after to create something that had that familiarity around this pretty new age and unfamiliar ingredient that we knew that they were going to need to become comfortable with.
[00:34:33] Ray Latif: As I mentioned, there's a lot of companies getting into the CBD space, including those that are launching sparkling waters or have sparkling water products. The messaging about CBD varies from brand to brand. Do you feel like it's important for everyone to get on the same page when it comes to discussing what CBD is and the benefits? I mean, is there a danger to the category if you don't all have a similar message?
[00:34:56] Lerer Hippeau: I think it probably creates a certain level of consumer confusion. And of course, that is rooted in the fact that the FDA has yet to approve it in food and beverage, and yet to approve claims. So we cannot say anything, you know, targeted about anxiety or stress, for sure. For instance, we can say calm and focus, but we can't say anxiety or stress. and because those are drug claims and those need to be FDA approved. So yeah, I would say we are all very eager for the FDA to move quickly on this so that we can start benefiting from the products that we've created and communicating all the health benefits of the products that we've created. Obviously, right now, you have to be pretty nuanced about it. And of course, that slows down the industry and is confusing for consumers.
[00:35:53] Ray Latif: Do you get involved in lobbying efforts? Are you out there personally talking to the FDA, talking to elected officials about CBD and how to get it approved as an ingredient for food and beverage?
[00:36:04] Lerer Hippeau: Yes, we are doing everything we can to get it approved as fast as possible. Obviously, it is what is best for the industry. And actually, We Have recently joined forces with some other notable CBD beverage companies to create a CBD beverage alliance with the goal of agreeing on regulations for the space that we think should be put forward.
[00:36:29] Ray Latif: That's going to cost money, I'm sure. I'm sure you're contributing money to the organization and to those efforts. It costs a lot of money to launch a beverage company. It costs a lot of money to scale a beverage company. You're getting there. You raised $2.5 million in July. How'd you come up with that number?
[00:36:45] Lerer Hippeau: At the time, that was the amount of money we needed in order to grow the business based on our current customers and the fact that we were in New York. Obviously, beverage is expensive and that was our first capital raise, but it will certainly not be our last.
[00:37:02] Ray Latif: I always hear from investors that brands should try to raise money not when they need it, but when they think they're going to need it.
[00:37:09] Lerer Hippeau: Mm-hmm. Mm-hmm. You know, it's time will tell how much money we need. We're sort of, I think that your job as a founder of a beverage startup is to constantly be talking to investors and sort of constantly raising money. So I would expect us to do another capital raise, but with an undetermined amount or not publicly. We're not publicly sharing the amount over the next 12 to 18 months.
[00:37:35] Ray Latif: All right. Well, stay tuned on BevNET. One of your investors in the $2.5 million round was Lure Hippo, which is an early stage venture capital fund based in New York, but they haven't made too many investments in food and beverage companies. How'd you get them on board?
[00:37:54] Lerer Hippeau: Lair Hippo are incredible seed stage investors who in the consumer space in particular, they've invested in some of the best brands of our generation, including Glossier, Warby Parker, Casper, Allbirds. So we really wanted to bring on a partner that was very brand focused and saw the value in building a brand and Lair Hippo was Obviously, we were so lucky and thrilled that they were keen to come on board. I think that at such an early stage in a company, LearHippo invests on the quality of the product and the team. And so we were really focused on telling the story of the brand and the team and really demonstrating to them that we had a very high quality product that had huge potential in the future, especially as CBD became regulated and more broadly available. So they were very quick to get on board and very excited about CBD. They've made other investments in the cannabis and CBD space as well. So we knew we were in good hands from the beginning.
[00:39:05] Ray Latif: Hilary, this has been a great conversation. I really appreciate you taking the time. Thank you so much. Good luck going forward with Sweet Reason. By the way, why do you call it Sweet Reason?
[00:39:13] Lerer Hippeau: Sweet, thank you for asking. Sweet Reason is an old philosopher saying for something that is just common sense. So we believe that hemp and cannabis have been in our lives for thousands of years, and we think it is just common sense that they come back into our lives in a big way.
[00:39:34] Ray Latif: Outstanding. Once again, Hilary, really appreciate the time and please stay in touch. We'd love to hear more about how Sweet Reason develops.
[00:39:42] Lerer Hippeau: Thank you so much, Ray.
[00:39:47] Ray Latif: That brings us to the end of episode 78 of Taste Radio Insider. Thank you so much for listening and thanks for our guest, Hilary McCain. Please subscribe to Taste Radio on the Apple Podcasts app, Spotify, Stitcher, or Google Podcasts. As always, for questions, comments, ideas for future podcasts, please send us an email to askattasteradio.com. On behalf of the entire Taste Radio team, thank you for listening, and we'll talk to you next time.
[00:40:22] Sweet Reason: 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.
[00:40:53] Big Geyser: 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.
[00:41:04] Sweet Reason: 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?
[00:41:20] Big Geyser: 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.
[00:42:03] Sweet Reason: 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?
[00:42:24] Big Geyser: 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.
[00:43:00] Sweet Reason: 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?
[00:43:25] Big Geyser: 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?
[00:43:58] Sweet Reason: And do you recommend that founders are able to call up a margin by channel?
[00:44:03] Big Geyser: 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.
[00:44:19] Sweet Reason: 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?
[00:44:49] Big Geyser: 3 3 3 3 3 But as you're growing, as you're getting to 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?
[00:45:22] Sweet Reason: 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?
[00:45:45] Big Geyser: Well, that's actually something we really help with. You know, 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 cost, 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.
[00:46:31] Sweet Reason: 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?
[00:46:48] Big Geyser: Absolutely. I think one of the keys, 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.
[00:47:18] Sweet Reason: 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?
[00:47:47] Big Geyser: 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.
[00:48:13] Sweet Reason: 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?
[00:48:24] Big Geyser: So people can text TASTE to 55123 for their free inventory guide to get started.
[00:48:29] Sweet Reason: 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.
