[00:00:10] Ray Latif: Hello, friends. I'm Ray Latif, and you're tuned into Taste Radio, the number one podcast for anyone building a business in food or beverage. Scaling a CPG brand isn't just about finding more ways to grow. It's about knowing which opportunities are worth pursuing. Hero Bread is taking on some of food's most entrenched categories with baked goods and pasta that deliver the taste and texture of traditional carbs with zero grams of sugar along with added protein and fiber. With products now in more than 9,000 retail locations, including Whole Foods, Target, Walmart, Publix, Sprouts, and Wegmans, the brand has built significant momentum and attracted investors including Tom Brady, Kevin Durant, and The Weeknd. In this episode, Hero Bread CEO Y.YC Cheng shares hard-earned lessons on scaling a CPG brand, including why the company walked away from a major food service opportunity, how D2C helped fuel retail growth, and why adding SKUs can actually hurt the business. He gets candid about the hidden costs of expansion, from inventory and logistics to opening new doors, and explains how founders can make smarter decisions about where to put their next bet. Hey folks, it's Ray with Taste Radio. Right now, I'm supremely honored to be sitting down with Y.YC Cheng, the CEO Hero Bread. Y.C., it's great to see you.
[00:01:42] YC Cheng: Great to see you.
[00:01:42] Ray Latif: We're out here in San Francisco at the offices of your primary investor.
[00:01:46] YC Cheng: Yeah, Great Point Ventures, DPV.
[00:01:49] Ray Latif: Yeah. And lucky for me, you're traveling in San Francisco today. Hero Bread27;s based in the city, but you're based in Boulder.
[00:01:55] YC Cheng: Yeah, that's right.
[00:01:55] Ray Latif: Yeah. Talk a bit about your background and how you got involved with Hero Bread.
[00:02:00] YC Cheng: The journey in food really started after I was at Topgolf. So I was the president there and sold the business Callaway and through that business and being there for a long time, just fell in love with the food service part of it and bring people's smiles and joy by the food that we bring them and really revamped that menu to be a lot better and a lot healthier and just, I got the bug. And so after selling the company, just loved being on the investor side and invested in a whole lot of food companies and health companies. And my own personal thesis and the family office I work with is that we want to invest in technologies and companies that allow you to be your own CEO of your own health. That's our thesis that there's no one else looking after your health and you should do it. And anything that enables you to do that is a good thing. in that we invest in a bunch of companies, Hero Bread being one of them. And I just can't stop being an operator and helping. And I just have a really personal joy when I help founders be the best that they can, because I wish I had more help and advice and stuff when I did it, because I ran into a lot of brick walls and took a lot of bruises. And so I try to pay back a little bit and fell in love with our founder, Cold Glass, and the Hero product. and just saw a huge opportunity to be able to sort of invest and help them in operating. And then the president there at the time, his name is Blaine, who was the CEO of Panera Bread. He had some health issues, so he had to retire. And Cole and the board tapped me on the shoulder and said they kind of liked my ideas and let's see if we can, you know, grow this company together.
[00:03:45] Ray Latif: Bread sometimes is bread. Hero Bread is not that. Hero Bread is different. How?
[00:03:51] YC Cheng: Hero Bread does everything that bread should do. And our main innovation is that we enable people to easily use it. And it tastes like you would expect. You can prepare it and eat it the way that you would expect traditional bread to be eaten. And you know, our big litmus test is you can give it to your family, and they won't reject it. Most of the time, they won't even know that you kind of swapped it out. And it does all of that work, but at the same time delivering much stronger macronutrients. And we do our best to make it, you know, as clean as possible, too. So we're really meticulous about our sourcing. But, you know, we have a theory that, again, to help you manage your own health and your family's health, we really want to help you get the nutrients that you need. And in our American current society, you read all the headlines and you talk to any doctor and they'll tell you that we're really short on protein, we're really short on fiber, and we eat too many simple carbohydrates and sugars. So Hero really addresses those things and at the same time delivering a great experience and making it easy for you, you know, because you don't need to work any harder. You're already doing enough and we just try to make it better for you.
[00:05:09] Ray Latif: Who's it for? I hear and see people often talk about how they're getting rid of bread in their diet. They're not eating as much bread. They're reducing the amount of carbs that they eat. But there are some people who want bread, just can't eat it. Are those the people you're targeting?
[00:05:29] YC Cheng: No, actually, Hero Bread shown in the last four years to be for everyone. You kind of know you're being successful when a lot of different groups claim you as theirs. And so we're really lucky that, you know, people who are trying to, you know, manage their weight Hero Bread's for me. People who are trying to manage their sugar and maybe have some blood sugar issues, they claim us. People with dietary distress, gut health, they claim us. And then just people who generally want to eat healthier, who don't want sort of the overly commercialized products and eat empty calories, they claim us. And the best group that I love is people who just love eating bread. and are still trying to avoid, you know, the calories and other things. And like me, I'm not of one category of like, I'm not keto, I'm not weight loss, I'm not whatever, but I do want something that's going to work for me more than just, you know, the taste. And that's why I love Hero myself.
[00:06:31] Ray Latif: A lot of people will love the taste of Auntie Anne's pretzels and I think that's another product that a lot of people have avoided because they feel like it's not the best for them. But it's a lot better for them now that Herobrand has gotten involved. You recently announced a partnership between the two companies. What did you see in that collaboration that could help both brands?
[00:06:54] YC Cheng: Like many people, Auntie Anne's was at the mall when I was growing up. And yet, you know, I personally hadn't ate it for many years until we made our formula with them. And it's been an amazing collaboration because we can bring our baking know-how and our ingredient know-how to a taste profile that a lot of people are very nostalgic about. And it's, it's a great flavor. Like they've really nailed it. But like a lot of people, I haven't really leaned into that product until the Hero product, because I want that protein. I don't want as many calories or sugar that's in their traditional product. And it's a great product, but for me, I want my food to work for me. And so that's why this opportunity really came up.
[00:07:37] Ray Latif: What do you see in Auntie Anne's? You might see a Subway. In some of those malls across America, the food halls. Is that what they call them? They don't really call them food halls. What do they call them?
[00:07:48] YC Cheng: Mall cafeterias. Mall cafeterias. Someone's going to email me. Food court. Food court.
[00:07:52] Ray Latif: Food court is what I'm looking for. You might see a food court with an Auntie Anne's, with a Subway, and Hero Bread might have been involved with both brands if there hadn't been a pivot in the business. Because you started out with Subway. You started out focusing on food service and food service opportunity. Why did you see that opportunity as a better path to growth than traditional retail, at least at the outset?
[00:08:16] YC Cheng: Originally, when you start a company, you're just grasping at anything that can help you scale, because you have so little resource, and you have so little awareness, and anything that you can use to help you get awareness, help you get distribution, help you get funding, is something that is very enticing, and you want to latch onto it. And that was the original intent with Subway. Cole and the team really needed that extra lever because just having your own product and praying that people will use it is just not a great strategy. So, you know, the whole agreement with Subway worked out because it helped them raise money, it helped them get awareness. But at its core, the commercial reality of it and the unit economics and the expectations of such a big company from such a small business that Hero was at the time are just very outsized and they're not quite aligned. And so, you know, it just had a recognition that It wasn't the right thing at the right time. And yet it is something that we would love to do. And we've started leaning more into food service as we're now more mature and can really have the resources to do it well. But yeah, as a lot of things in life, it was a timing issue.
[00:09:33] Ray Latif: Sometimes you don't get a second chance to make a good first impression. How did you navigate out of food service in a way that would set you up for retail success?
[00:09:41] YC Cheng: I would say we were not very elegant, but something my mentors have always taught me is like, you got to expedite what's inevitable. Just do it, pull off the bandaid, get it done. We did it as kindly as we could. Subway understood. They, I think, saw the writing on the wall too. And we all just agreed it's not sustainable. So it's not like there was a great transition, but what we did in saying no to that opportunity is to say yes to something else. And that yes to something else was D2C. So we took the resources, redirected it towards D2C. And you know, it's just a strategy that we employ today, which is like, control your own destiny by getting your product in people's mouths as efficiently as you can. And that's what D2C really is. And it's the people who love our brand, who want to try our new products, and it allows us to sort of like take the layer away between us, our products, and the consumer. The issue with retail and food service and some other channels is that you don't get the direct feedback. You don't get the speed of understanding what they like and don't like, and you can't viscerally feel it as much. And I'm very much a consumer-driven type of person, and our company is very much consumer-led. And to have a faster feedback loop and a more non-filtered feedback allows us to make better products and to understand what the trends are. And you can then take that data and sell it into the retailers. So we took the data from D2C that we have, you know, thousands of people buying this stuff. And we kind of know generally what region they're buying it in. And then, you know, we took that data at the time to Sprouts, to Market District, to Publix, and showed them that their consumer really wanted a product like ours, which was, you know, a really good tasting sort of mainstream taste profile bread, but to have a lot more protein and to have a lot more fiber and just generally be better for them.
[00:11:47] Ray Latif: Earlier you said that Hero Bread is a brand for everyone and everyone could be eating Hero Bread. When you're selling D2C, you might get a more specific consumer, a sense that you understand where they're coming from, how old they are, what walk of life, income, et cetera, et cetera. Did you get a sense that you were zeroing in on a specific demographic, a specific type of consumer, or were you getting that sense that, Hero Bread really is for everyone?
[00:12:18] YC Cheng: No, it was a lot broader than we had imagined. And it very largely mirrors, you know, what you see in food today. A lot of them are women and moms trying to buy for their families. And they're just trying to make a healthy decision that doesn't take a lot of effort.
[00:12:36] Ray Latif: How do you get your first customers online? What was your customer acquisition strategy like with C2C at the beginning of your decision to make that pivot?
[00:12:46] YC Cheng: Well, we were lucky in that we did have some awareness from Subway, and so people were already coming to Hero.co, and we would then try to harvest those people and get their contact information so when we did launch, we could tell them. So there was a really healthy, organic growth there. But we did what most companies do. You try a bunch of ads on, you know, TikTok and Instagram and Meta and Google searching, and you just start kind of tuning that for whatever budget you have or whatever targets you have, and you can start building a list. How much do you need?
[00:13:23] Ray Latif: What size budget should you have if you're trying to build a community, build a following when you're launching D2C?
[00:13:32] YC Cheng: You don't need very much. Anywhere from $10,000 to $15,000 a month on ad spend can get you a really good read. Assuming your unit economics and your repeat business are good, you'll recoup that money. The key is, though, the repeat business. You need to have a product that people like and can use frequently.
[00:13:51] Ray Latif: That's where the subscription model comes into play. Were you finding that people started and wanted to subscribe from the get-go or was it a learning process for those consumers? Did you have to sort of spood feed them a reason to subscribe?
[00:14:07] YC Cheng: Well, obviously we try to make it easy for them. We try to, um... How do you make it easy for them? I think it's twofold. Generally, our philosophy is, and this is just something I've developed over the years, is like, do what's right and what the consumer wants. As a philosophical stance for our business, it's not like you have to subscribe. We're one of the few subscription companies that still offers individual sales and all that stuff. So we always took the stance that if you want to subscribe, great. Here, we'll make it really easy for you. We'll make it easily reoccurring. We'll remind you when it's happening. We'll let you skip it. We'll let you pause it. We'll let you change the configuration. We let you save a little bit if you do it. But if you don't want to, that's fine. We'll still service you and you know, your life is hard enough. You don't need a company like us telling you, you know, how to buy bread.
[00:15:00] Ray Latif: Well, fulfillment is also a really big part of it as well, and making sure that people receive the product on time, receive the right product in the right condition. I wouldn't want to meet that mom who was expecting her loaf of Hero Bread that she was going to make sandwiches for the week and doesn't have it. So how do you make sure that you're buttoned up on the fulfillment end of things?
[00:15:21] YC Cheng: Well, we have an amazing operational, logistic, and e-commerce team. One of the benefits of being a hero and being a brand that people really believe in is that we're able to hire really good people. Is that outsourced? Well, we run it ourselves, but the 3PL and stuff like that is outsourced, but we manage it closely. We picked the best partner we could, and we have really high operating standards. And we pride ourselves in having really responsive customer service. And you kind of like manage what you measure. And we measured the quality and the delivery and satisfaction metrics really closely. Our goal is to make sure that families can get it when they want. That is really why people do subscription is because it is sort of their regular routine. And I think that what the pandemic and now people are discovering is that just like it was a routine to go to the grocery store, you know, every week. I think a lot of people now, and I think the statistics say something around 20% or so, do order online with a subscription for a general grocery run. And they just love the convenience of it, that every month you stock up on your Hero products. You don't have to think about it. It comes, you know what you have, you know it's going to show up on time and good quality, and you throw it in the freezer and you use it when you want to.
[00:16:35] Ray Latif: Well, I see you've talked a lot about the good of D2C. There's obviously challenges as well. What have been your biggest challenges on D2C? What have been some of the mistakes that I assume you have made and how did you fix them?
[00:16:48] YC Cheng: Well, lucky for us, most of the mistakes we made we did with our previous companies. So, you know, we've all learned and got our bruises in that way. The biggest challenge is clearly the logistic and logistical cost. The marketing opportunity is great. The way to build a relationship is great. And the technology platforms are so much simpler now, you know, you don't need a whole team to build a website anymore or anything like that. So the biggest challenge is getting the delivery and making sure that you're not losing your shirt in delivering a great experience for the customer. So it's apropos, you know, with oil getting close to 100 some dollars a barrel, and every single freight company that I know is starting to add on freight surcharges, and they're adding 10%, they're adding 15%. d2c operates on very low margins. So like that alone can hurt the business. So that's by far the biggest challenge. And it's really just a spreadsheet type of exercise to make sure that you know, exactly what you need the average order size to be what you know, your delivery costs will be, you know, what your 12 month LTV is. So like, you know, very few companies are first order profitable on d2c. But you better be pretty sure you're either second or third order profitable, depending on, you know, what your lifetime value of your customers for 12 months and, you know, balancing all that is just very difficult.
[00:18:13] Ray Latif: When you're forecasting for the future and you don't see an end in sight for oil prices, at least oil prices rising, does it make you wonder about changing the products in any way, say decreasing the size of it or making a loaf an ounce or two less?
[00:18:33] YC Cheng: Do those things come into play? I think those are all valid strategies. We try not to compromise the product ever. That's kind of our internal motto. But if we can save a little bit on logistics by bundling or shipping full truckloads or, you know, we're big enough now that we can make arrangements with our delivery partners to find ways to bulk deliver. And so, yeah, we try to find everything we can logistically. We try to get more efficient from a marketing perspective, because every penny saved is contributing to the overall business. So we'll dig in all those parts before we compromise a product, because the product is really the secret sauce. It's the hero. Yeah, 100%. Yeah, if we could put a cape on every loaf, we would. But it's that word of mouth and that trust that the consumer has and their love for that creates the repeat business. And for us and in food, you just can't survive without repeat and without word of mouth. So, you know, we really don't want to kill the goose that's laying the egg. And so, you know, we want to nurture that as much as possible. We want to continue to make the best product, because if we compromise too much on that, then what else do we have, right? Like, we might as well be another big CPG company that is squeezing margins out of their product every day. And that's just not our frame of mind. We'd rather operate way more efficiently and keep the product quality up.
[00:20:00] Ray Latif: Word of mouth doesn't sound like something that you have a ton of control over, but it seems like something you could cultivate.
[00:20:06] YC Cheng: How do you cultivate word of mouth? Oh, it's very intentional. The success of any great brand or good product is word of mouth. It just goes back to my early days as a product manager and as a software engineer and stuff that if the product is great, people will find it. And yes, you do have to market, and yes, you do have to talk about it, but you will find a way to make a business out of a good product. And if you're gonna spend a dollar, you're better off spending a dollar making a product better than spend a dollar marketing it in general. You just really focus on what the consumer wants and why they want it and how does it fit into their lives. It comes from like choosing products that are in categories that people really do need. I have a very hard time working at companies or developing products that are just kind of like ancillary or things that are nice to have. I find those very challenging. But if it's something that someone genuinely needs, then you want to make it easy and you want to make it really good. That's the science behind it is like, how do you make something incorporated into people's routines easily and have enough wonderfulness to them that people want to talk about it. Those are the kind of levers.
[00:21:26] Ray Latif: I hear sometimes people talking about Hero Bread Tom Brady's bread. Tom Brady is one of the prominent investors Hero Bread, Kevin Durant, The Weeknd. Has that helped word of mouth and awareness?
[00:21:37] YC Cheng: Yeah, for sure. Yeah. Yeah, for sure. I think, you know, it greased the skids. It shows at least some level of credibility. And, you know, retailers and buyers and investors all like to sort of be in that group a little bit. I don't know what percentage it is, but there's a reason why a lot of celebrity-led investor brands and stuff like that just have some success. Like, it only takes you so far, though. You know, maybe it makes getting a retailer meeting 10% easier, right? Or maybe it raises your awareness, you know, a couple points on YouGov or whatever, but every point helps. But it can't make your company successful by itself.
[00:22:15] Ray Latif: Right. Well, if you can get Tom Brady to come to your meeting with the Walmart buyers, It might help a little bit, but you still have to get that meeting in the first place. And I imagine your success on D2C helps a little bit, but how much does data and sales numbers on D2C really matter when it comes to retail and big retailers like a Target?
[00:22:39] YC Cheng: I think it matters a lot, especially Target, actually. Like, it's funny that you would just pick that example. I think Target cares more because they've seen the benefit of nice, hip brands in their store. And I think some of the trouble that they had and issues they had the last couple of years and why they're going back to the playbook now of having great brands within their walls is because they know it helps. It always goes back to, you know, Jon at Once Upon a Farm, and you see Jennifer Garner not only running around to retailers, but running around to all the bankers and all that stuff before the IPO, like that really helps. And she, wow, puts the work in. So if you're able to get something like that, like that, I think it helped tremendously. And not everyone can have a celebrity or something. So then your D2C data can help show and paint that picture. And it's empirical. You can tell that the Hero Bread on social is viral. People are talking about it. Like it's not just us paying people to do it. Of course you have to pay a little here or there to juice it and to help it. fuel it, but there's an organic buzz about it. And then that story can be shared and the retailers understand that that's happening. You know, we have outsized store velocity because of the activity and the energy around Herobread. And if you can paint that picture and show it empirically with data, it helps a lot more.
[00:24:04] Ray Latif: How much does innovation matter to those retailers? You have a strong product. You have a strong portfolio of products already. Oftentimes retailers want new products. They want exclusives. How does innovation fit into that retail strategy?
[00:24:19] YC Cheng: I think everybody wants it.
[00:24:20] Ray Latif: Everybody meeting.
[00:24:21] YC Cheng: retailers, I think, internally, every investor, the media, yeah, everybody, give me something new to talk about, right?
[00:24:29] Ray Latif: Exactly. That's why we all go to Expo West, right?
[00:24:31] YC Cheng: Yeah. But what what pays the bills is your core items, you know, like, so it's the same conversation we have with the retailers is just like, Yes, you know, we're fantastic at innovating. You know, we've come out with roughly 10 SKUs that are all performing extremely well across it. So, you know, we're not just bread now, right? We're bread. We have this amazing protein noodle that's made with wheat. We have amazing pretzels. Like we talked about Auntie Anne's. We just came out with this really, really tasty sort of uncompromising shortbread biscuit that it's basically our team saying, what would it be like if we had no constraints and made something delicious? Our bagels are selling tremendously well, and our tortillas are selling really well. Like, I don't think there's actually a better tortilla in the market today. And that's not just because I'm biased. So everybody wants those new things to sell, but the core items are really what fuel the growth. And we'll give, you know, some innovation here or there. I don't actually think we've done any. on the retail side. It's like, here's our portfolio. Everybody should take all this use. The data will show you that. But yet some people hold out at the retailer for their own strategy or for whatever reason. But we believe that all of them should go to everywhere as much as we can. But innovation is hard. It's expensive and they don't always sell that well. And I think the main issue there is that things that are innovative don't yet have an audience and they don't have it in their routine yet to buy. And as we talked about earlier, the repeat in your routine business is what really drives our core metrics for us.
[00:26:17] Ray Latif: Sometimes brands innovate because they are latching onto a trendy ingredient or concept and need a new product to incorporate that ingredient or concept. We posted an episode of Taste Radio about a month ago and the title was, is it a trend or is it a distraction? How do you know when it's a trend that you should latch onto or just a distraction for your company?
[00:26:41] YC Cheng: just good old fashioned roll up your sleeves and do the research. We believe that there are truly macro things happening that are backed by science and backed by real need. And I think those are the things that you know that will be long lasting. So that's how I know like protein is not a trend. Sure. There's real science behind it. There's real data. It's been a problem for over 30 years and general consensus and doctors and everybody are on it. And unless all of a sudden people really eat a lot more protein and it's more available, then that's not going to get solved. But yet, you know, certain things like flavors, the way that something looks, those are all emotional. Those are not as scientific. There's not a long history of need. Not that they're not important and not that they won't move sales, but they're just less enduring. And in that, then, you know, you should use them a different way. So like the way we think about it is big macro trends should be part of your core platform and things that are more sort of like fleeting should be part of like an LTO strategy or a limited strategy, right? Where you can address that need from the consumer, however fleeting or lasting it may be. Then you can be in the conversation. but you're not worried about building like your whole supply chain around something that may not be around a year from now.
[00:28:10] Ray Latif: Distractions often impact your bottom line. Four or five years ago, profitability became the most important thing in CPG. Top line growth was the buzzword or words five years prior to that, but it seemed like every investor wanted to find brands that were profitable or had a path to profitability. Do you feel like you're on a good path to profitability? Are you profitable at this point? And how do you balance the need to expand distribution and awareness and availability of hero products while you're also trying to chase profitability?
[00:28:46] YC Cheng: Yeah, it's like the hardest dance you could do. Again, talk about trends and versus macro, right? I think macro is like you should run a good business and you should be on a path or be profitable. And that's what we focus on all the time. That's what they teach you in business school, right? Yeah, you should, right? I always talk about like, well, you know, you should make sure that you have more cash going in and going out. Like if you're going to be a business operator, like you should be focused on cash and then everything else is great. I smiled when you're asking that question because Yes, quote unquote, the investors turn towards we need profitable companies, but I guarantee you that they turned down a ton of profitable companies that were only doing like 10 million or 15 million in revenue. They, I think, wanted both. They always want both. They want you to be profitable, but they also want you to scale year over year. And it's kind of like asking for the impossible, right? It's very, very rare that you get both. So yeah, I think it's a trend to lean one way or the other, more growth or more profit. But at the end of the day, finding the right balance between the two is the right way to go. So you can then be a great company regardless of what the current trend is for what they invest in. The biggest thing, as you know, in food, and you know, a lot of people taught me this, I had to learn it too. You got to manage your inventory. And so innovation is another drag on your inventory, because you got to carry another SKU, you have to have another supply chain, you have to store it more, you have to pay slotting fees for that you have to remarket something that's new. You're scaring me right now. I know all this, but I'm slinking back in my chair here like, oh, man, that sounds really hard. It is. And people completely underestimate it. Yeah. Right. Even just opening a new door at a new banner is a huge undertaking. And so every one of those hurts your profitability. It's a drag on your short term profitability, even though your long term profitability could benefit from it. So you have to be very, very intentional about it. This is where having a great finance team or background and I have an amazing team. who can sit there and just draw out scenarios, right? Like, we have a great model and we can say, hey, if we make this investment now, how long does it take us to recoup? And not only that, but if we make this investment now, how much cash draw does that take? And does that take us to a level that we're uncomfortable? Should we make another bed instead? There's always choices. You can choose to go to another door, you can choose to go to another product, you can choose to just double down on the marketing of the products that you already have, or you could go and do store visits and merchandising to make sure that's actually on shelf. or makes general decisions, like, we should probably buy the syndicated data. So we actually know what's going on, instead of, you know, doing some other big bet or whatever. So that's just being a good operator as being a good CEO is to understand what all your choices are, pick the right one at the right time.
[00:31:48] Ray Latif: The investors that I've spoken with who talk about inch wide, mile deep, and the classic do well in your backyard before you go into somebody else's backyard, that'll give you a good understanding of perhaps how to market a product. It'll give you a good understanding of where geographically it might sell best. You're based in Boulder. The brand is based in San Francisco. When you have the product being sold in Boston, Massachusetts, how are you keeping an eye? I know the data helps, but how are you keeping an eye on how the product is merchandised, how it looks on shelf, how consumers are interacting with it? Do you have outsourced teams when it comes to merchandising and brokerage and things like that?
[00:32:30] YC Cheng: Yeah, yeah, we leverage brokers heavily. Greenspoon's a great partner of ours. And we have our sales team, like I would say we encourage them most of the time to be in the store, right? Not sitting behind your computer, but like go, go look at the product on the shelf. We also work with third parties to do merchandising. When we sample in a store, we do merchandising. That's the beauty of having, gosh, I think we're about a million plus email marketing lists now, is that people send us photos of us on a shelf all the time. You know, we get this free auditing, basically, of all these stores.
[00:33:06] Ray Latif: You're with Hero Bread brands, right? Or are you in the freezer case? No, we're with other brands. And that aisle can get messy.
[00:33:13] YC Cheng: Oh yeah, for sure.
[00:33:14] Ray Latif: Yeah, it can get messy and stuff can get stacked on top of each other and tossed around and whatnot. I love that you have your sales folks out there in the aisles themselves and helping to make things look good because it does make a huge difference. If your brand looks sloppy on shelf, people are going to think it's a sloppy brand.
[00:33:31] YC Cheng: Yeah, for sure. But I think it's really hard, right? I think it's one of the hardest part, other than logistics, being on shelf and understanding what that is and understanding what your consumer is really, really hard in retail. And that's why I don't actually know how people do it without a DTC business. I cannot comprehend actually. And so that feedback loop and process is so slow and so filtered that I'm not sure I can make all the right decisions without having D2C and be able to talk to people directly.
[00:34:02] Ray Latif: Is D2C still a significant part of your business in terms of revenue?
[00:34:06] YC Cheng: Yeah, very much so. Continues to grow and yeah, it's a big part.
[00:34:12] Ray Latif: Do you ever think that maybe you could have just kept doing D2C and avoided retail? I think about a brand like Dose. You know Dose Supplements? Basically, they sell turmeric-based supplements in liquid form. They have two-ounce shots and they have 16-ounce bottles as well. And most of their business is DTC. They're sold in some stores like a GNC. I think they're sold in Wegmans as well. But they're doing so well with their e-com business that there's discussions about that being sold for a billion dollars. Now, Dose could have invested heavily in retail and really started saying, hey, that's where we're going to find a lot of customers. But just by being primarily DTC, they're almost a billion dollar business, again, in a category that you don't really associate with DTC beverage. As much as they call themselves supplements, it's a drink.
[00:34:59] YC Cheng: Yeah, I think it depends on your product and your category. And it's surprising in a drink category to be able to build that much on D2C. I think it does have somewhat to do with their shelf life and sizing and quantity. I think that helps a lot, probably. But I don't know the business very well. But for us in bread, it's no secret that because we have to pay for shipping, that it is cost prohibitive for some percentage of the population. And it's not a small, trivial amount of people who would find that price to be prohibitive. So once you know that, then you have to go retail. But if you can figure it out and you have a product that's really small to ship and can get there quickly and whatever other dynamics there are to it, and you have good margins, like, yeah, you can just stay on. on D2C. Like, yeah, I've worked on a lot of brands that just stay D2C and do a great job.
[00:35:51] Ray Latif: Well, until someone invents an oven that can take flour or some sort of base ingredients, toss them into a pan and create a loaf of bread in one second or one minute.
[00:36:03] YC Cheng: Yeah, just add water.
[00:36:04] Ray Latif: Just add water, bake for one minute. That would be a pretty good D2C model. Yeah. Yeah. It looked like a sponge, but it'll be okay. probably wouldn't look attractive, probably wouldn't taste as good. So yeah, you know what, forget my idea, stick with Hero Bread and what you're doing over there, over here, excuse me. YC, it's been so great speaking with you. I feel like this is a business, this is a brand that makes a lot of sense, you know, in this time and in this stage of awareness in health and wellness in this country. And I think, As much as I don't love the saying, we're just getting started, it feels like for all the business that you are doing, you are just getting started. The total addressable market for bread, I mean, it's got to be ridiculously huge. And so if you're trying to get your products in the hands of as many consumers as you can, you still have a long, long way to go, but you're already on a really good trajectory. So thank you so much for taking the time, sharing so many good insights with our audience. I really appreciate it.
[00:37:04] YC Cheng: Yeah, of course. Thanks for the conversation.
[00:37:08] Ray Latif: That brings us to the end of this episode of Taste Radio. Thank you so much for listening. Taste Radio is a production of BevNET.com, Incorporated. Our audio engineer for Taste Radio is Joe Cracci. Our technical director is Joshua Pratt, and our video editor is Ryan Galang. Our social marketing manager is Amanda Smerlinski, and our designer is Amanda Huang. Just a reminder, if you like what you hear on Taste Radio, please share the podcast with friends and colleagues. And of course, we would love it if you could review us on the Apple Podcasts app or your listening platform of choice. Check us out on Instagram. Our handle is bevnettasteradio. As always, for questions, comments, ideas for future podcasts, please send us an email to ask at Taste Radio.com. On behalf of the entire Taste Radio team, thank you for listening, and we'll talk to you next time. you
