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[00:00:39] Ray Latif: Hey folks, I'm Ray Latif, and you're listening to the number one podcast for the food and beverage industry, Taste Radio. This episode features an interview with Michelle Tsucalas and Oliver Buccicone, the founder and CEO, respectively, of super premium granola brand, Michelle's Granola. If you take the brand out of the farmer's market, do you have to take the farmer's market out of the brand? Not if you're Michelle's Granola, which has maintained its packaging and quality of ingredients since inception and become one of the top-selling brands in its category. Launched in 2006 by founder Michelle Chicalis, Michelle's Granola markets small-batch granola made from natural, organic, and non-GMO ingredients. The company's Maryland-based manufacturing facility produces over 35,000 pounds of granola and muesli weekly. Michels also sells a two-skew line of granola butter made from oats and nuts. The products are sold nationally at over 3,800 retailers, including Whole Foods and Wegmans, where Michels is the top-selling granola brand at each chain, as well as Ralph's, Kroger and Sprouts. In the following interview, I spoke with Michelle and company CEO Oliver Buccicone about how a focus on quality and quote, premium simplicity has enabled the brand to scale while maintaining its original image and positioning. They also spoke about the patient path to distribution in conventional grocery, how they've pushed back on retailer demands for promotional pricing, and why examining every cost is key to being cash flow positive and profitable. Hey, folks, it's Ray with Taste Radio. Right now, I'm honored to be sitting down with the leaders of Michelle's Granola, Michelle Tsucalas and Oliver Buccicone. Michelle, Oliver, great to see you. Great.
[00:02:30] Oliver Buccicone: Great to see you, Ray.
[00:02:31] Ray Latif: I'm praying that I got your names correctly or pronounced correctly, that is, because we just went over it and I still think I screwed it up.
[00:02:40] Oliver Buccicone: I think you did a good job. I imagine that there's a few different ways to pronounce it, but this is the way that my husband's family pronounces it. So I got on board with that. Chicalis.
[00:02:51] Ray Latif: Well done. Now you and your husband live in a town called Lutherville Timonium. We were chatting about this before we hopped in the mics. For folks who are thinking about visiting the area in Maryland, Lutherville Timonium is in Maryland. What are some things that they should be looking out for?
[00:03:07] Oliver Buccicone: Well, I mean, just to start, it's definitely a mouthful, Lutherville Timonium. It's a hyphenated name. And I was mentioning to you that around here, people tend to call it one or the other, depending on what part of town you're in. So we live in Lutherville, but the Michelle's Granola facility is headquartered in Timonium. And I had never heard of it either. I'm from the D.C. area. But Lutherville Timonium is a suburb of Baltimore City. It sits just north of the city. What I love about it is it's just naturally beautiful. There's lots of hills and trees and open spaces around. We're really close to farmland and horse country up here in Baltimore County. But we're also like five minutes north. You can be right in the heart of Baltimore City and enjoy all that the city has to offer culturally. And it's also a great food town. But, you know, we have the quiet conveniences of the suburbs.
[00:03:57] Ray Latif: Where is the farmers market in the town?
[00:04:00] Oliver Buccicone: There is a farmer's market at the fairgrounds.
[00:04:02] Ray Latif: Okay.
[00:04:02] Oliver Buccicone: And the Casper Nola facility is like a stone's throw from the fairgrounds. So we are in the heart of Timonium.
[00:04:09] Ray Latif: I did bring up farmer's markets and like a lot of brands, Michelle started out as a farmer's market brand. And when you look at the packaging today, it still feels like it could fit in any farmer's market across the country. Clearly there's a lot of intentionality in that.
[00:04:26] Oliver Buccicone: I mean, I did start at a farmer's market. And when I started out at the farmer's market back in the spring of 2006, I started with the intention of selling pretty simple product that delivered on Taste Radio quality. And I learned from the customers that I had at the markets that were coming back week over week that that was something that was needed or missing in food retail. And so we've stuck with that same emphasis all along about on product quality and delivering on exceptional customer service. And that is working for us and has worked for our brand. And I think that when customers go out and buy the product, If it looks to them like something that they can buy at a farmer's market, we hope that it also tastes like something that they would find at their local farmer's market. I also think another thing that we learned at the markets, and we sold at farmer's markets for over 15 years, was that product quality matters, but also that emotional connection to the business and to the maker. And our customers are savvy, health-conscious, planet-loving consumers. And so we want to make sure that our packaging and what we're offering inside of our packaging is meeting all of those emotional needs and the desires that consumers have when they're paying $8 for a bag of granola and making sure that they're getting all of those expectations out of the experience. And so for us, what we did at the farmers market delivered on that and what we're doing at grocery retailers across the country is, you know, continuing to deliver on that.
[00:06:06] Ray Latif: This is year 17 of Michelle's Granola. And Michelle, you were running the company for the first 14 years. Oliver, you came along three years ago. I believe you joined the company in October of 2020. And I was looking at some of your past roles and kind of wondering how you became the CEO of a granola company. What drew you to this business? What drew you to the food and beverage? Well, in particular to the food industry?
[00:06:33] Michele Tsucalas: Michelle, do you want to do the context and then I'll jump in?
[00:06:37] Oliver Buccicone: I'd love to paint the picture of where I was and where the business was when I first met Oliver because, Ray, I wasn't looking for a CEO when I met Oliver. But back in 2018, 2019, the business was in an interesting place. We had just gotten Whole Foods Global. We'd been selling into Whole Foods in the Mid-Atlantic and then acquired a second territory. region, I should say, in 2014. But in 2018, we went Whole Foods Global. So we were kind of on this precipice of moving from a regionally loved and well-known brand in the mid-Atlantic into national distribution and more coast-to-coast presence. And the business was operating with a really healthy margin. I would say that we were in overall a really good and exciting place. But at the same time, personally, as owner operator, I noticed that I was beginning to feel a little bit stuck. That I knew that we had tremendous amount of growth opportunities in front of us, but I was not exactly sure how much I wanted the business to continue to grow and in what direction. I was struggling with things like identifying the right next best opportunities for us. But I did know in my heart that I wanted to continue to grow. So pace was definitely a question. And then looking internally at my team, I had a really tremendous dedicated team of people who were helping the company grow and stay true to its values. But I also recognized that we had some gaps in our skill set and experience. And so I started to really get more serious in my conversations within my network about finding some mentors who could help guide me through these next steps of growth and really being able to answer some of the questions that I had with more like strategic certainty. And I could feel my team wanting those answers to, you know, wanting to begin to answer to a budget or to a strategic plan that was that was documented, as well as continuing to walk through the doors that were opening for us. But it was this additional support, I think, that we felt like we needed to shore up who we were and the direction that we were heading in. And so a good friend introduced me to Oliver. Oliver is a mentor. And we started working together in a consulting capacity. We met once a week for about a year. And we were working together on building out a financial model and strategic growth plan for Michelle's Granola. And so we discovered a lot together, both about each other and our working styles and our values and our skill sets, as well as discovering about opportunities for Michelle's granola to continue to grow. And when COVID hit, so this was like halfway through our working partnership, I was trying to figure out how to keep my team safe and keep our operation open. And Oliver was the first person I called. And that was a light bulb moment for me because I realized that we had developed trust in our relationship too. And I knew that he was the person who could help guide me through difficult challenges that we were likely to continue to face as a growing brand. And so sometime that summer of 2020, I started to think, would Oliver potentially leave the comfort of his stay-at-home dad role and push a consulting gig and come on board with Michelle's Granola and help us in a more full-time committed capacity? And I swear it was like at the same time, he said, would you consider bringing me on as the CEO? So that's a little background and context in terms of where I was as founder and owner and operator of the company and how Oliver and I met.
[00:10:20] Michele Tsucalas: Yeah, it felt really natural, right? Like it just felt like kind of the process just kind of occurred. And I don't think either of us set out looking for it to become what it became, right? It just kind of worked out to be a great working relationship. For me, my career has been in a lot of different industries, but manufacturing is at its core, whatever it happens to be, right? So even when I was doing consulting for PricewaterhouseCoopers, my companies that I worked with were manufacturing companies. And so I learned so much about the power of lean transformation, lean enterprise systems, and the power of building process. And then going back to the Marine Corps, I already talked about it, right, is teach, coach, mentor, empower your people, give them the tools to succeed, and then set them loose. Some things are, they're just ubiquitous, right? It doesn't matter what you're producing. I've worked in a company that produced hundreds of thousands of doors a week to a company that produced four or five pieces of equipment in a year. And at its core, it's about building good, sustainable processes, training your people and setting them up to succeed. I think it helps in this particular case, as I got to know Michelle, I got to know the company. I really love the company. I think that our mission and the product is exemplary. It's great. It's something that I believe in. I choose to purchase it, even though, you know, I get a free bag every week, I buy more. You know, and that always helps, right? I think one of the hard lessons I learned over the course of my career is might be fairly straightforward for a lot of people, but it's love what you do. And I do truly love what I do here. You know, Michelle mentioned I was kind of the stay at home consultant that was taking consultant gigs as they came along. But I did a turnaround in 2018 that didn't quite turn. You know, the last thing I did was I had to close a facility in Brazil. A whole lot of people lost their job. And I had this moment where I was just like, this isn't who I wanted to be when I grew up. And Michelle and I's kids are about the same age, and I just said, I'm going to take a break, spend time with my kids. I'm going to drive around in the minivan and do all that stuff. And it helped me get a little bit more perspective about really what's important in our lives and in the things that we do on a day-to-day basis. So, yeah, I think my anniversary is in about a week, right, Michelle? My three-year, my official three-year.
[00:12:33] Oliver Buccicone: It's been three years since you took the role on formally.
[00:12:36] Michele Tsucalas: Yeah. And I think the fun part is there's certainly been a learning curve, right? So like from the defense world to industrial nominates, like there's been a bit of a learning curve about learning the industry, particularly the lingo, right? I think, you know, our mutual friend, Brendan Murphy still makes fun of me because I call it rooftops instead of stores, you know, number of places where we're points of distribution. But I think I'm finally getting the hang of it after about three years.
[00:13:03] Ray Latif: Well, Oliver, I wouldn't worry too, too much about knowing all the lingo all at once. I feel like it takes people about 10 years to really understand exactly how the food and beverage industry works. And even then, it seems like the grizzled veterans are the ones who really have a handle on it. But that being said, the people that you're selling to, consumers of today, it seems like are looking for premium products with ingredients that they understand, a nutrition facts panel with a list of ingredients that they can pronounce and that they are familiar with. And I think back to our first conversation, a term that you brought up that is premium simplicity. And I love it because I really feel like it encompasses what consumers, again, are looking for today. Michelle, can you talk about how that term, premium simplicity, reflects the mission and values of Michelle's granola?
[00:13:59] Oliver Buccicone: Yeah, I love that term too, Oliver. Speaking of industry lingo, I mean, Oliver has helped define who we are as a brand going forward. And it's caused me to reflect on our founding values and why I started this business in the first place, as we think about who we are and how we're going to maintain that as we grow. But for me, premium simplicity is all about just the most delicious food is the simplest. It comes from the cleanest, simplest, most wholesome ingredients. And when I started making granola, it was things that I had in my home pantry. And the recipe has not changed, Ray, since that very first farmer's market sale until today. We have managed to scale a process where we're incorporating the same ingredients and processing them in a very similar way. So it definitely informs everything about what we do from a day-to-day operational standpoint, but also our overarching strategy. In fact, two pillars of our 2024 strategy are product quality and customer service and thinking back to our early days and how we are going to continue to emphasize those things and deliver the very best product quality and exceptional customer service that we can going forward. So I think it's like at the center of everything that we talk about, I think we realize that What we do, the product we make is what we have to offer. So it always takes center stage.
[00:15:35] Michele Tsucalas: One of the things that we kind of say to each other all the time and we try to use when we're talking to other folks is we want to bring real food and make better real people into our customers' kitchens and routines, right? We have premium ingredients. And I really, one of my favorite things is we are who we are, right? You pick us up, you read the flavor. Oh, cinnamon raisin. Okay, cool. I flip it over. oats, it's brown sugar, it's raisins, you know, it's real ingredients, real premium ingredients that we pay for, that we put together in a handmade and caring way that just creates this delicious product that you can't get enough of.
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[00:16:39] Ray Latif: When I think about Michelle's granola, immediately I think of a Whole Foods Kroger and Sprouts or a specialty grocery store chain. But when you are getting into the Kroger's and the Targets of the World, it does require a different kind of mindset. When does that process start and how do you prepare for that next evolution?
[00:17:00] Michele Tsucalas: I think we've been really lucky in that a lot of retailers are starting, they started to come to us about, you know, two and a half, three years ago. So we were doing fantastic at Whole Foods. And our first major retailer, conventional retailer was China Landover, which is the giant in the mid Atlantic region. And they came to us and they wanted to bring us on shelf and feature us as a local company. And we've had a fantastic relationship with their category managers. And they've been a fantastic partner in helping to put us in front of consumers and working with us on charges and everything else that goes along with getting the conventional. The beauty of them is that we're able to go direct. Nothing is distribution. They're a major part of our, of how we go to market, but we're able to go direct to China and land over in the other 80 USA companies. And it allows us to be a little bit more flexible with pricing, allows us to get a shell price that perhaps is a bit more attractive to the conventional customer. The thing that we've really done in the last three years to drive some of that growth is saying yes, and having those conversations and then being willing to really kind of push back when we get that, hey, we want 16 weeks at 25% off or whatever the request is, and working with those retailers to help them understand that we think our shelf price is very reflective of the product that we have. And so that our discounting strategy is different than a lot of the other companies out there. So it's, it's kind of this, just I referenced the changing business model. Well, that's the evolution that we've had is having these kinds of open conversations with our CMs, understanding what they need on the conventional side and how that differs from say a Whole Foods. Where Whole Foods over the years has been a huge supporter and helping us grow and kind of working with us and helping us see different things and kind of taking that mentoring role. The conventional stores are much more like, Hey, let's, let's get this going. Let's get it out there. Let's figure out how this does.
[00:18:45] Ray Latif: Well, that leads to my next question about pricing. I think the typical price for a bag of Michelle's granola is about $8. Is that accurate?
[00:18:54] Michele Tsucalas: I mean, it depends on where you buy it, but that's about average, yeah.
[00:18:58] Ray Latif: Okay, so in conventional, at a Whole Foods, I think $8 for a bag of granola, the average customer there would see that as a reasonable price. In conventional, it might be a little bit of an uphill battle explaining why you should be paying that price for a bag of granola. And I can see and I can understand why a retail buyer, a giant might say, okay, we need to have promotional pricing for an extended period of time to get consumers aware of and interested in your product. But the everyday price of $8, I mean, how do you get conventional customers comfortable with that?
[00:19:36] Michele Tsucalas: So much of our work, particularly in conventional, is about helping consumers get a taste of the product first. Tasting is believing. And you know, earlier you asked us about scaling small and all that. And we talk about the premium ingredients we use. The first bite you have of the granola, you immediately see it is delicious. It is fantastic. And we have an incredibly high rebate rate, rebuy rate, right? So a new customer, Oliver goes out, he has a coupon for whatever it is, buys a bag, tries it. I am incredibly likely to go and buy a full price bag and continue to be a consumer of the product based on the data that we've gathered. We believe that it's priced based on the ingredients that we have in the product and the value that is provided to the consumer. That's not to say that velocities in conventional are as high as velocities in natural. They are different. They're different paths to market, and they're a little bit lower in conventional than they are in natural.
[00:20:32] Oliver Buccicone: An interesting part of our story is the pace of our growth. We have grown very slowly over the 18 years almost since I started. And we didn't start in conventional until a few years ago. So we had kind of 15 years of proven velocity and natural before we even started to dabble in conventional. Oliver mentioned Giant of Landover. This is in our home region where we have a really solid brand reputation. And I think we're very fortunate that we're having the experience of kind of starting in conventional and giant is not our only conventional retailer. But starting in a region where consumers are already looking for us. And we heard time and time again I love traveling to Whole Foods to buy your products but I wish it was in Giant where I'm buying you know 80 percent of my groceries. So it was just you know an obvious next opportunity for us. And we were excited when Giants said that it was the right time. I think something that's contributed to our slow growth is that in this industry you don't call all the shots. You You have to wait for the retailers to be ready for you on their timeline. So we were really excited when Giant came to us and said, I think it's time. And they have been fully behind us since we got on shelf with them. But I think we are learning some interesting lessons. And there are some important realities and differences between natural and conventional. But this is the way that our consumers are shopping and conventional. And so our products, we want to make sure that our products are there too.
[00:22:00] Michele Tsucalas: And to bring it back to pricing strategy, When you think about our DNA plan and how we use discounts and allowances, we try to be very, very careful to protect that shelf price, right? We don't want to unintentionally devalue the product by being on promotion too often. So we work hard to make sure that that shelf price is the everyday price that consumers know, like, this is a fair price for this granola. Yes, they're going to be on sale on occasion, but it's not going to be a brand that is consistently trying to be at $5.99 or whatever it happens to be.
[00:22:28] Oliver Buccicone: If we're lucky enough for them to read Food & Wine magazine, Food & Wine features us as one of the best granolas in the country. And we are at the lowest price of any of those products. So what I think we are trying to sell ourselves on is a fair price for a really high quality product. And I'm glad that we are not priced out of conventional retailers. So I think we're really hitting it right where we need to be for us to be able to sustainably produce and offer a high quality product, but also be accessible to the everyday consumer.
[00:22:58] Ray Latif: Sometimes pack size enables greater accessibility to consumers. Have you ever thought about reducing your pack size to introduce, to be an introductory kind of product to conventional consumers?
[00:23:11] Michele Tsucalas: So we do actually have what we call the MVP, which is the mini variety pack that we sell on our website. We've not yet brought that into stores, but it's certainly a conversation that we would have to get it out there. What's interesting is, People use it in different ways, right? So like, there's Oliver who wants to try out the product, but then maybe there's Michelle who's buying it, or Ray who's buying it every week, and throwing it in your work bag and you should be having a snack at work, right? So there's different profiles that are using that. Long way of saying, not opposed to putting that in stores if it would do well.
[00:23:43] Ray Latif: But it sounds like you're not confident at this point that it may work?
[00:23:49] Michele Tsucalas: I think that one of the things that we do really, really well is we stay focused on what's in front of us, particularly in the Wholesale Channel, right? What's in front of us is there are still people coming to us and saying, we want to put your product on shelves. And so avoiding adding unnecessary complexity to our manufacturing operation is part of our success, right? So as you scale, complexity can multiply before you know it. And so by keeping our skew count of what's going into wholesale, very straightforward, it allows us to be very reactive to what the stores need. Does that make sense?
[00:24:23] Ray Latif: Yeah, absolutely. Oliver, you had talked about the importance of demos. I hear this a lot from entrepreneurs and operators who say, you know, once a consumer gets to try our product, they will become customers. They will become consistent consumers of our product. It is expensive to do demos, it's expensive to get people to try products, especially if you have a pretty big retail footprint, 4,000 doors, you're constantly trying to get food into people's mouths. It's interesting because I had seen this post on LinkedIn, the CEO of a company called The Coconut Cult, who is connected to a brand called, well, he is the co-founder of a brand called Once Upon a Farm. The CEO of which is John Foraker. John Foraker, famous or well-known person in our industry as being the CEO of Annie's before it was acquired. He had talked about why demos are less important for his company. And what's more important is getting the product and positioning right. And he had said, if you get the product and positioning right, velocities will come afterwards. And it sounds like In a lot of ways, that has worked for Michelle's, but you're still saying demos are a critical part of what we do. I guess, what's the balance there? How do you weigh product and positioning and making sure that is set and well-defined in conventional and demos as well? What's the balance there?
[00:25:49] Michele Tsucalas: What you're causing me to think of is during COVID, demos weren't a You buy one, get one for a user or coupons for a full price pack, right? And the number one question that we've been asking ourselves for the last three years is how do we convince or how do we get the consumer to take the risk and buy an $8 bag of granola one way or the other? One way is our authentic packaging, the way we present ourselves, how are we on shelf, right? And so working with retailers to make sure that we're presented properly. But at the end of the day, when you have a product like ours, we're tasting is believing. Because let me take a step back. Differentiation in the granola world isn't necessarily all, it's not visual, right? So packaging is one thing. People can see our granola through our bag. They see that it's nice and chunky. They can see until they actually taste it, that's where the differentiation really comes in. So yeah, look, I think the question isn't, are demos effective? The question is, how do we continue to get consumers to try the product one way or the other, whether it's through couponing or full price coupons through some of the, there's different partners you can like social make sure that you can work with to sign people up to demo or actually paying to do in-store demos. You know, as, as they're coming back, we're finding every time we do a demo, we get lift in a region. And then of course it follows back, but there is a sustained change to the baseline, right? It's not going to be huge, but maybe it's 5%. We're finding that for us, demos are effective because of that very much tasting is believing and helping consumers see the differentiated product.
[00:27:23] Ray Latif: Are you outsourcing demos or is a lot of that based on an in-house strategy and, you know, hiring people? that you know will best represent the brand?
[00:27:36] Michele Tsucalas: I'm chuckling because as we're nationwide, we're absolutely outsourcing. But I'm sure Michelle's got a whole bunch of stories from before COVID. We did our demos, right? Like we, you and Tony, our sales leader, will go out and do the demos.
[00:27:47] Oliver Buccicone: Yeah, so demos are a really important part of getting in front of new customers, but also building a brand and kind of getting feedback from customers on what's working for them. We learned a lot about packaging, price point, product inclusions, flavors, all of those things doing demos. So I think it's still an important part of our strategy. Does that scale as we scale? Probably not. So we're not doing as many demos as number of stores that we're in right now, and that's virtually impossible and a challenge for every growing brand. I do think that they're still important, but more so we have to have a variety of different strategies to get in front of consumers so we cannot rest on our laurels or rely on simply our brand reputation or that that package is going to hit with somebody, you know, for the one person who thinks that's a farmer's market quality product and package, another person might think, I want to buy something that looks more mass manufactured. So we're not for everybody, and we're not trying to be for everybody. And I think that's why our authenticity continues to be one of our core values. But I think that we do have to try a lot of different strategies that we haven't had to use in the past when we were a smaller brand. And I could personally go and demo the products to customers. So it's a combination of things now. And you have to try them all that that collectively they're going to help keep the brand moving forward.
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[00:30:06] Ray Latif: Well, sometimes it helps when you have a robust innovation strategy and are creating products that could appeal to a variety of people. How does innovation factor into your growth strategy, your overall growth strategy, that is?
[00:30:21] Michele Tsucalas: We would call it innovation. One of my favorite things is the limited edition process that we have. We try to do two or three limited edition products a year. Number one, We had a great partnership for our matcha flavor this summer with Jason Mraz. And it allows us to have a little bit of fun. But what it allows us to also do is kind of test the market to see, is this interesting? Does the consumer find this interesting? We had a product, it's now Coco Chip, but two years ago now, I think it was our Valentine's Day limited edition. And it was the first time in my time here, so for three years, where we had to do a rebate. We ran out of the product that we did first. And we said, wow, this is super popular. We're going to make it again. And then we looked at each other and said, this has to become a mainline flavor. And it became a mainline flavor. And where we want to innovate is by bringing our methods to create good flavors using premium ingredients without all the extra stuff. So that's where innovation comes in. On the flip side, one of the things that we're constantly talking about is how do we bring oats to different places in the grocery store? So the oat and nut butter is a great example of that. We've taken our granola and turned it into a spreadable product that is fantastic on food and other things like that. But that is in a different aisle. It's a different segment than granola and it helps us kind of look beyond where we're at today. And when we do our budgeting, when we do our financial planning, The base is granola. And then frankly, we don't even add the math for the whole nut butter yet because we don't know what that's going to be, but it's there. We know that it's a product that is amazing and that people are going to try and love. And so we're excited to see what that does for us.
[00:32:05] Oliver Buccicone: I think a key part of our innovation is listening to our customers. They have certainly guided us in our product development over the years. So back at the farmer's market, customers were looking for seasonality in their products. So we developed a whole seasonal line of offerings. We've had customers say over the years they're looking for a lower sugar option without wanting to compromise on the quality of our granola products. We created a toasted muesli which was slightly different than a traditional raw bircher muesli in that it's toasted and really brings the flavors of the oats and the nuts forward a slightly different texture and a lower sugar offering. and then most recently wit we saw our customers all other nut butters on. It the complexity of flavor has to offer. And so we s there to make something th engender brand loyalty and also potentially attract new people to the brand. But I was thinking about the oat and nut butter and the things that we see on online, on social media, people doing with our products and how that kind of informs our product development strategy. But I was also laughing because when I started this granola company, I don't think smoothie bowls had even been invented yet. I know acai was definitely not in my lingo, but now we're like thinking about how do we really continue to elevate the granola enthusiast experience and what else can we put in their acai smoothie bowls or in their yogurt parfaits that are true to the core of granola. And it's been so interesting because you would think that being named Michelle's Granola might limit you to a certain category. And now we're really beginning to see the expansiveness of the opportunities that might exist there.
[00:33:56] Michele Tsucalas: One of the things that we have to, that we are working on contending with is innovation creates complexity, right? So as you add new things, but something's got to come out or you have to manage that complexity. Otherwise it just gets too big. Right. And so the hard part is working with the team to say, okay, so, Hey, we love this one. I know we love this one, but maybe this one's got to go. or we have to set it aside for an hour, or the case may be, and it's those hard decisions you have to make so that innovation can continue to be a part of who you are, keep the brand fresh and exciting, but without blowing up your manufacturing operation by accident.
[00:34:27] Oliver Buccicone: Yeah. And also the market and our customers help make those decisions for us sometimes. Like we recently saw Ray Latif Disco on what was forever our second best-selling SKU. And here I am waking up 10 years later going, oh, they just want to bring something new in. And so we will continue to evolve and innovate in response to what the market and our customers are telling us.
[00:34:50] Ray Latif: It costs money to do that, though. Innovation can be expensive. And I, in my first conversation with Oliver, I bolded, I bolded these next few lines that I'm going to speak here. The company, as in Michelle's granola, has always been fully bootstrapped. and is cash flow positive and profitable? Okay, as we all know, any listener, regular listener of Taste Radio knows, this is not common. This just doesn't necessarily happen, even for companies that have been in business as long as Michelle Espinola has. How have you managed, Michelle, to grow to this point without outside capital?
[00:35:25] Oliver Buccicone: there are a few key reasons that we've been able to get where we have the way that we have. I think the number one thing is that we've grown slowly. We've kept pace with our cash flow and we've been very careful about our growth decisions and very intentional about the opportunities and the partnerships that we took on to support our growth. But it has been almost 18 years. So This has not been like a venture unicorn type of business. This has been a really slow and steady growth. I think things that helped us manage cash well in the first 15 years or so is that I stayed in a position of primary leadership for the company that offered us a lot of flexibility. So when we were doing well, I got paid. If we weren't, I didn't. So I think that that helped a lot. The team that we've built has also been a key part of helping us to manage cash. Now I mentioned that we've had a few employees who've been with the company since it was less than five years old. And these are not industry veterans. These are granola people who were willing to wear many hats for many years and do whatever was needed to help the company grow. We own our own manufacturing. I think that this is a really interesting part of our story just as much as how we've managed to grow without outside investment. We do make all of our own products in our own facility. And I think that that allows us flexibility again and also control over our margins which has been key to our growth. And then also, you know, up until recently, as we've begun expanding our distribution, most of our marketing was grassroots, like field marketing. So we did demos, we did events, any event in the area where they would let us come and sell our products, we did. Farmers markets for 15 years. So these were the types of things that we were doing to help build awareness of our bra products in line with wh for and just to kind of a brand reputation for Mi So I think all of those th up until recently without I get really serious about
[00:37:43] Michele Tsucalas: do this without a tremendous amount of sacrifice over the course of time. And I think Michelle and her family and everything she's done, she's made sacrifices to ensure that the company gets to where it needs to be. But I think it's also that, look, I get really serious about this one, but it's day in, day out financial discipline, managing costs across the board to ensure that you have the cash to be able to pay for your growth. without having to tap outside resources. So, look, when I came in, I think, Michelle, I broke your role into five jobs, I think it was.
[00:38:12] Oliver Buccicone: Yeah, that's right. So, those were five jobs I was doing like 85% well.
[00:38:16] Michele Tsucalas: Right. Well, you're doing pretty well, but like I look at five roles, right? Yeah. We developed this focus, but the catch is that when you create five roles, each of those roles want to spend money too. And so building in that financial discipline on a monthly basis with a team and kind of looking at how much are we spending? How are we doing? And you have these competing priorities, right? So the retailers, distributors, brokers, everybody's taking their piece. And so figuring out how to work with them, how to negotiate them with them to make sure that you still have enough cash coming in to pay for your operation. I think internally, we are very heavily focused on the way in which we produce, making sure that we're producing in as efficient a way as possible, but again, ergonomically safe and at a high degree of quality. But for the most part, it's really managing those distributor costs and those interactions as the product leaves the building and financially speaking, right? So the dollar follows the product, managing that interaction and not letting it get outsized. Inside the walls, we have benchmarks that we want to perform to throughout the P&L. If you wanna know where the most friction is, it's once the product leaves the building.
[00:39:29] Ray Latif: Could you break that down a little bit more, Oliver? Once the product leaves the building, that's where you're finding that costs can get out of control, get out of your control?
[00:39:39] Michele Tsucalas: So I have a bit of a rant that I tend to go on about the industry. I think that when you look at shelf prices, sometimes retailers, not retailers, manufacturers or product companies are forced to have a shelf price that gives them room to accommodate the full value chain between the manufacturer, the producer, and the consumer, right? So sometimes you have the retailer, they need their margin. Then you have the distributor, they need their margin. And then in some cases, you have the broker and they get their portion of the margin. And all of a sudden, you're looking at maybe 50% of your margin is going out the door after the product leaves your building, so to speak. And so managing those interactions, determining where do you really need a broker, if at all, how do you work with the distributor to either limit different types of promotions or make those promotions worth their while, right? So if you're going to do an OI with a major, an off invoice with a major distributor, making sure that you're working then with the retailers who buy from that distributor to then take advantage of that OI and pass that on to the consumer. Making sure that every dollar you're spending after producing the product and selling it is done with the consumer in mind is absolutely critical. But to me, part of the reason that grocery prices are so high is because there's so much money that goes out the door after the product is made and shipped. I don't have any solutions to that. We're working on figuring out how to navigate that environment and how do we make sure we do it in the most financially responsible way.
[00:41:13] Ray Latif: if only everything could be sold direct to consumer, right?
[00:41:16] Michele Tsucalas: Well, right. And to be perfectly frank, we love retailers that allow us to go direct. If we can go direct, we're in control of so much more, right? So if we can fill a truckload of granola up and send it off directly to wherever, That is the ideal scenario for us. But we're also almost 18 years in, like Michelle said, those new folks that have, they're sending a pallet, maybe two pallets off. They need those distributors, but then they have to learn how to not just take everything the distributor tells them to do, right? So if the distributor comes in and says, you have to do 16 weeks OI this year, you don't negotiate. You have to work with them to help. You have to work with the distributor and understand that it's a they break you, you're not going to be useful to them. Sorry, I get passionate about this topic.
[00:42:04] Ray Latif: No, I am glad you do. I mean, it's a passionate topic. And I think, you know, at the end of the day, food costs are very high. I mean, inflation has really affected the average American consumer. And, you know, when you are selling an $8 bag of granola, people are gonna be questioning, you know, how do I fit this into my overall food budget? And if you have to raise the price by a dollar, it might just not fit into the budget at all at a certain point. So I totally understand what you're saying and I understand why you're passionate about it. It's, you know, creating affordable, healthy, better-for-you products and making them accessible to all Americans should be a passion for everyone in our industry. Exactly right.
[00:42:42] Oliver Buccicone: And I think it is, like Oliver says, it's about carefully managing costs, keeping an eye on those costs, understanding where you might be able to negotiate, and making sure that our dollars and our customers' dollars are being well spent. I think that's the bottom line.
[00:42:58] Michele Tsucalas: On that topic, we talk about where what I've learned in other industries is that, look, if you have a P&L that's poorly managed, you're not going to raise prices your way out of a mess, right? So you have to make sure that inside your house, is well managed before you start thinking about pricing and everything else.
[00:43:15] Ray Latif: This has been such a great conversation. I feel like we could keep going for a while, but this has been phenomenal. Thank you both so much for taking the time to be with me today. I know our audience is going to love this conversation. Really appreciate everything you guys do and congratulations to both of you on building this amazing company and seeing its next evolution.
[00:43:34] Oliver Buccicone: Thank you, Ray. It was great talking to you today.
[00:43:37] Ray Latif: Thank you, Ray. It's been a pleasure. Thank you. 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. On behalf of the entire Taste Radio team, thank you for listening, and we'll talk to you next time.
[00:44:32] Founder Oliver: you
