Understanding the Role of a Venturepreneur
Have you ever wondered what a venturepreneur does? The combination of venture capitalist and an entrepreneur- helping mostly small emerging companies scale.
In this episode of Page One Podcast, Luke Peters speaks with Mark Thomann about his role as a venturepreneur who helps take small brands from $1 million to $100 million in revenue. Mark is an entrepreneur and venture capitalist who has a history of reimagining and relaunching iconic brands. He is the founder of Dormitus Brands and recently founded an early-stage health and wellness fund called Spiral Sun Ventures.
Listen in to learn the importance of small brands looking at the failure of other brands as an example for them to succeed. You will also learn why it is extremely difficult for emerging brands to be profitable unless they exit to big brands especially in the beverage industry.
- Learning how to take care of your physical health to be more productive in your professional life.
- How to build a brand and a community that continues to purchase your product.
- The lessons to learn from failed brands or products similar to yours for you to succeed.
- Why emerging brands need significant marketing or to exit to big companies to be profitable.
- [2:22] Mark explains why he formed Spiral Sun Ventures as a way to help young entrepreneurs to scale their businesses.
- [5:36] How he changed his life-work balance to be more focused on health and wellness.
- [9:39] The importance of bringing human capital to impact small companies and take them from $1 million to $100 million in revenue while remaining gritty and entrepreneurial.
- [13:28] Why brands need to understand why other companies like them failed plus generating consumer buzz around their product.
- [18:36] He explains the size of his company’s investments and how they estimate value.
- [21:04] The key things he looks for when helping a company and the growth they have experienced over the years.
- [24:31] How to build a company to become a household brand through direct to consumer eCommerce business.
- [27:07] Mark explains how they successfully relaunched a soda brand through great marketing.
- [34:02] The benefits of natural ways of building brands and communities and building vital relationships
- [36:10] Why it is challenging for small brands to make money especially in beverages unless they exit to big companies.
- [40:38] He narrates why he failed in a business he acquired from Unilever and why he wouldn’t do traditional advertising anymore.
Speaker 1: Welcome to The Page 1 Podcast, a weekly podcast featuring a variety of guests and thought leaders on topics ranging from channel strategies, to tariffs, influencer marketing, best-in-class product launches, and all the details about how to accelerate your e-commerce sales with the big box retailers, or what we call, r-commerce. Now, here’s your host, Luke Peters.
Luke Peters: Thanks for joining us on The Page 1 Podcast, I’m your host Luke Peters. And this is the podcast where I bring you the best and brightest leaders to share consumer product sales and marketing strategies that’ll help you grow your business. I’m the CEO and founder of NewAir Appliances, where I cut my teeth selling products online and now started Retail Band, where I hope to help other brands succeed in product launches, influencer marketing, and B2B online sales strategy. And right now, I’m offering a free evaluation of your online sales strategy. If you’re interested, find me on LinkedIn or go to Luke@retailband.com to learn more.
Luke Peters: And, in this episode, we’re going to learn from Mark Thomann. Mark is an entrepreneur and venture capitalist. And in this special episode, you’re going to learn Mark’s strategies for investing in and growing dormant brands. So personally, for a lot of my friends, have you ever wanted to grow your company by acquisition? If that’s a question or a strategy that you might have, then this is your episode. Mark is a venturepreneur, a term he recently coined to describe his background as an entrepreneur and a venture capitalist.
Luke Peters: Mark has a history of re-imagining and relaunching iconic brands. As the founder of Dormitus Brands, he recently founded an early stage health and wellness fund called Spiral Sun Ventures. Mark attended the College of Holy Cross. Mark, thanks for joining me today on The Page 1 Podcast.
Mark Thomann: Thank you, Luke.
Luke Peters: And we were just talking about the Chicago weather. Mark lives in Chicago, married, three kids, and it sounds like the weather is good and we were just talking about the Housewares Show coming up in a couple weeks. So we’re recording this on the first Monday of March. And Mark, before we get into it, why don’t you fill in any gaps and explain a little bit about what Spiral Sun Ventures does?
Mark Thomann: Sure. So, for many, many years, I was really acquiring trademarks and patents, and had always had this fascination with intellectual property and started acquiring dormant trademarks and then relaunching companies around them. And then about a little over eight years ago, I had a health scare and it really had an impact on sort of how I wanted to spend my time and money and resources. It was a little bit more than a scare, it was a reality check that I had to really change my lifestyle, eat healthier, exercise, and I wanted to be around, spend more time with my family, and young kids.
Mark Thomann: So, about four years ago, and by the way, everything is good now, I did change my lifestyle, but I started blaming sort of my sickness to the way I was eating, my lifestyle, in particular processed foods. So, about four years ago I decided to co-found and launch a venture capital onto that invest in early-stage food companies. And I thought that my experience and my contacts and my relationships with retailers and so forth could really help these young entrepreneurs figure out how to scale their businesses.
Mark Thomann: So Spiral Sun was formed and since that time, we’ve raised a significant amount of capital to invest in some pre-revenue companies, and companies that continue to grow. We invested in approximately 15 companies in our first fund, and we continue to invest in early-stage health and wellness companies more broadly than food in our Opportunity Fund, and our second fund.
Mark Thomann: So, for me, it’s been a wonderful experience not only as a venture capitalist, but more importantly just mentoring these entrepreneurs in how to better scale their businesses, and how to take my experiences and relationships and ultimately allow for these businesses to scale more quickly.
Luke Peters: Great. That fills in all the blanks. And definitely we’re going to dig right into that for the listeners of this podcast, a lot of brand owners. Hopefully we’ll give you guys some real actionable tips on maybe how to acquire companies or how to use that in a way to grow your existing brand. But also, what Mark does with inside of these brands, these dormant brands, or these small companies and how he grows it. But Mark, before we get to that, I just thought that was interesting and seems like a life-changing event with the health scare. And a lot of people don’t want to have to change their, they don’t want that to happen to have to change their lives.
Luke Peters: And you hear about people, how they were living before, and then how they lived after. And I guess, so you could maybe share some wisdom on that. Did you totally change your work-life balance? Was it more just around diet? I’m just curious if you could just say how things look before and after, and pass on that wisdom to the audience.
Mark Thomann: Sure. I think really prior to the sickness, I was really focused on all the wrong things. I worked a little too hard, was eating improperly mainly because of the fact that I was working virtually most of the day, and was not prioritizing spending the quality time with the family the way I should’ve been doing. And when I did get sick, it really repositioned how I thought of not only my way of life prior to that, but how I wanted to move forward. So, yes, I stopped eating the sugary snacks, and I stopped trying to continuously work around the clock while ignoring the more important things in life.
Mark Thomann: So, for me, my a-ha moment was how can I take the career that I’ve built and have an impact and a legacy? And at that time, I decided to invest in a, at the time, the largest indoor farm that was producing leafy greens in America. And I did that, it was more of a restructuring opportunity, where the company was virtually failing, and I came in and I utilized some of my background as a turnaround specialist that helped bring that company to a point where it survived and it survives today, but had to dramatic pivot that business.
Mark Thomann: But, for me personally, it really became being catalyst for how I wanted to really spend my time. And then I was able to also look at dormant brands that I had acquired or we had acquired as a company, and reposition them as health and wellness products. So, if you look at Spiral Sun today, it’s really the integration of my previous work as well as finding new entrepreneurs and new products. But, there are two, in particular two, dormant brands in our portfolio that I’ve repositioned in a much healthier way than what they were in the first run.
Luke Peters: Yep. Okay. Cool. Makes a lot of sense. So yeah, let’s get rid of the sugar. I’ve done some of that personally, and I found it makes a big difference, and I stopped eating bread, and stuff like that. But yeah, definitely, a huge proponent of eating healthy, whole foods when possible. So sounds like it made a big difference for you.
Mark Thomann: Made a big difference and it still, I still struggle with it. It’s not easy to eat healthy. But, I certainly do my best and certainly continue to invest in companies that promote that.
Luke Peters: Yeah. You know, it’s funny, just on a tangent, hopefully, and I might have the same path in some ways, or same interests as you, because I am really passionate about healthy food, but sometimes you’re caught up in your own business, in your own life, and it’s hard to find just that exit philosophy, to get out of your own way. There are so many things to right on your own ship before you can move on to that other thing. But yeah, I know, I’m really jealous actually that you’ve been able to do this. But I have a lot of thoughts on it. Just to your question, or point right there, it is difficult. And what I found is the power of habit, if you can just say, “Okay, I’m just literally not going to do this.” And then that will define your other choices.
Luke Peters: So for folks, even if someone is not gluten intolerant, and they’re like, “Well, you know what?” It’s not a matter of that only, but just the fact that these types of carbs overall aren’t great, and someone just says, “I’m just not going to eat bread.” Then that one habit can have a huge effect that’ll roll down through a bunch of other decisions that you make. So I’m not here to preach about diet, but it’s something that I found works pretty good, anyways, I thought that was very cool that that had an impact on your life.
Luke Peters: So, Mark, why don’t we talk about when you’re looking at these companies, and I guess my first question is a big one, and that is, I just want to understand your system, because you did bring up an interesting nuance that I didn’t know, that you’re a turnaround specialist. So I actually wrote down another question on that. But do you have a system? How do you repeatedly successfully invest in and build these brands?
Mark Thomann: It’s a really great question. I do think my turnaround background, I was doing restructuring work for over 10 years, and I was primarily selling distressed companies. And that really trained me to look for the fundamental flaws and why a business didn’t work, or why a brand failed. I utilize that skillset and really look at things with a very critical eye today mainly because of that background, which was really industry agnostic, where if you really know what made a company fail, you’re much better equipped to understanding how to make it succeed.
Mark Thomann: So, for me, when I look at my own brand portfolio as well as these early-stage companies that are trying to build a brand, it truly is about people. And I know everyone talks about that, but we have incredible entrepreneurs in our portfolio. But they need help. Not everyone can do everything. In early-stage companies, the biggest problem is, if you look at a lot of venture funds, they really can’t roll up their sleeves, and they provide capital, but there’s not a whole lot more value.
Mark Thomann: So the premise that we went in with Spiral Sun Ventures is how can we truly not only invest our capital, but can we bring human capital to bear to really impact these companies in a very small way? And how do we do it? We have a ecosystem that we created of people that everyone from retailers to marketing agencies, and they all have to go in understanding that number one, that this isn’t a Fortune 500 CPG company, these are young entrepreneurs that have identified a white space primarily in food and beverage, but at health and wellness in general. And how do you move the needle to help them where they can build a brand that has enough critical mass that one of the larger CPG companies is going to look at acquiring them.
Mark Thomann: Then, obviously, a lot of the times, the big CPG companies just can’t, they just can’t figure out how they want to invest their money in new categories and new product. And a lot of these early-stage companies, they’re doing all the heavy lifting. But at the end of the day, it really is about exiting to the bigger companies that have the infrastructure to take it to the next level. If it only, like in beverage in particular, if you don’t have the DSD network and you’re highly dependent upon all the distributors, it’s very, very difficult to get beyond $100 million. And you really need the Pepsis, the Cokes, the beer companies to ultimately take it to a point where you couldn’t go from $100 million beverage company to something far greater than that.
Mark Thomann: So, I try to instill that into the thinking of every young entrepreneur that’s in our portfolio that this is really, really tough, to go from $1 million in revenue to $100 million plus in revenue, and ultimately you need the resources, the infrastructure that some of the big CPG companies have. In order to get there, you have to figure out a mix between bringing in advisors that have that big CPG experience as well as remaining gritty and entrepreneurial, because that’s one of the missing elements to some of these big CPG companies. I hope I answered your question, Luke.
Luke Peters: No, definitely. I have a couple more to jump in. And I like that you mentioned white space. It’s funny, because we’re doing our planning, and that’s a key term. Instead of outcompeting. But finding the white space. Is it mainly function? So, when these companies come in, they have a great idea, maybe they might even have their mission or purpose, but is success early on, let’s say first five, 10 million, is that mainly dependent on marketing would you say?
Mark Thomann: Yeah. I grew up in Boston actually. I’m still a Bostonian at heart. And years ago, I’m giving away some of my age here, but years ago we had a politician by the name of Tip O’Neill, most of us will remember Tip O’Neill, but he said something that was really telling, it’s a quote that stayed with me for all these years, but he said all politics are local. At the end of the day, that adage applies to brands and brand building. And these young brands that are going into categories that’s still being, still growing and expanding, that you need to build communities, and you need to really do start in a very local way.
Mark Thomann: Then, they gain momentum. And they continue to gain momentum by getting into significant distribution, but also figuring out how to get those velocity numbers. A lot of times these entrepreneurs, some within my portfolio, they’re folks so focused on trying to get on shelf. What they don’t realize is that the question they should be asking themselves is not really how they get on shelves, but why something is coming off shelf to make room for them.
Mark Thomann: If they approach it that way, they’ll have a much better chance for success, because they’ll know why this other company may have failed, or why a certain SKU failed from that other company, and why the retailer is making space for them. And then they have to build the community and the awareness, that is necessary in order to generate that buzz to move the product on shelf.
Mark Thomann: And you had mentioned early on in this podcast that you show people how to build their e-commerce business and direct to consumer business, that’s an incredibly powerful tool today, and we specifically look for businesses where you have that direct to consumer business, because you have tremendous amounts of data. And the retail landscape has changed tremendously over the last 10 years. I think all brands should be really focused on understanding the consumer, how to articulate why they meet a need. And online marketing, and e-commerce really allows you to do that, where it didn’t in the past.
Luke Peters: Yeah. And you know what’s so interesting about that answer is, of course you remember Tip O’Neill we’re reading about him, and great quote that you brought up there. But what I thought was really interesting about that was the more things change, the more they stay the same. Because going back to a quote he said, and then you’re mentioning how important it is to build communities in a local way, but it’s so funny how so many modern day books will be talking about that in a way that’s a new idea. But it’s not a new idea. Like you’re bringing up, it’s always been an idea, and now it’s just framed in a different way. Where folks will write about that you have to build a tribe. But I couldn’t agree with you more though, it’s a great point. Build a community.
Luke Peters: We can all do better at doing that actually, we’re just launching a beer cooler, and beer enthusiasts, so I’m just taking notes on that, how can we better build a community around that. We’re already doing a good job, but it’s just a great point and a great reminder.
Mark Thomann: Like, for example, Luke, our most recent investment, and I’m only picking them because we just did it last week. But we just invested in a pet food company that focused on the keto diet for dogs, and it’s a community, right now it’s just a direct to consumer business, it’s called KetoNatural. And the founder has not only written books on the keto diet, but he had a very compelling business plan. But he built the business first direct to consumer, because he really wasn’t ready to go on retail shelves. And ultimately, he needed to be prepared and understand who his consumer was, and he built that community around his product online.
Mark Thomann: And the next step is to take it to more traditional retail. But there’s a tremendous education that goes along with that product, and how to you best do it. If you use the tools that are easiest and I don’t want to say cheapest, but certainly most provocative in building those communities. And I’m not an expert on online direct to consumer businesses, my strength is really in traditional, conventional retail. But I look at those numbers and have people around me that understand it and do a better job than I do.
Luke Peters: Yeah. And that’s a good example. It’s funny, these are all the things I read up, also I know a lot about keto, and one thing, one reason why that’s a great, or a great product idea is because people are really passionate about keto when they’re involved in it. There’ll definitely be some education for that investment of yours, but at the same time they’ve got a really passionate, engaged audience, when people believe in keto, it becomes a lifestyle essentially. So yeah, that’s super niche as well. So that is a good example. Speaking of those investments, what is the range of your investment size? Is that something that you can talk about?
Mark Thomann: Sure, yeah, no problem.
Luke Peters: It’s usually like a minority investment? These are like Series A, how does the typical investment look like?
Mark Thomann: It’s across the board. The KetoNatural deal I just did, that we just did, enclosed, we did it with another fund here in Chicago called Corazon, and it was great because they’re much more focused on direct to consumer subscription model businesses. And having them leading that due diligence was excellent. But in general, we like to deploy 250 to $500,000, sometimes we’ll do lower, sometimes we’ll do higher. Pacha Soap, for example, which is becoming a household name in the natural channel, we deployed $2 million into that company, but we’ve watched that grow significantly over the last four years, seeing probably 10X on grow on top line revenue since we’ve made that investment. But generally it’s 250 to 500. But we want a reason to put more in and to continue investing in the companies that we pick to be part of our portfolio.
Luke Peters: Great. And that’s usually for some sort of like … is Series A typically, is that like a 30% stake in the business? I’m not hugely knowledgeable about.
Mark Thomann: Yeah. It could be a little less than that. But we come in so early, because there’s really a void in the market space, especially in Chicago, there’s really not a whole lot of B funds here, especially in health and wellness, or food and beverage. You certainly see it in tech. With food and beverage in particular, again, I’m a kid from Boston, so I use an analogy, I think we need a Ted Williams average in food and beverage. And so, it’s really, really important to mitigate risk and to come in at valuations that makes sense. But if we’re going to come in, and the entrepreneur is going to give us a good valuation, they want to see us really help them move the needle. So we try to practice what we preach.
Mark Thomann: It’s funny, part of our due diligence process, we have to get references from all of our entrepreneurs, founders. I tell each of them to do the same on us. Call our portfolio companies and ask them if we add value. If we don’t, it’s probably not a good match.
Luke Peters: Wow. And then when you come in, so, I think at the beginning you mentioned, I mean, it’s a relatively new fund. Is the idea to exit in five years and if so, how many exits have you guys had the change to go through?
Mark Thomann: Yeah. We’re three years in, and our Opportunity Fund and our Second Fund are just, you really just got to kickstart this year. So we’re still very, very early in our life. We probably have a longer lifecycle than most early-stage venture firms, it’s simply because we’re investing so early and these companies take a long time to mature. But we have yet to have a traditional exit, but we’ve seen growth in everyone of our portfolio companies. And certainly see exits in a number of them. Farmer’s Fridge, for example, was a concept that I was the founders’ first board advisor, and one the first investors. We’ve seen that company grow immeasurably from a small kiosk based salad business to one that’s now in major cities throughout the United States.
Mark Thomann: When we first invested, it was a very small amount of money, and we’ve seen 30, $40 million we’ve invested into that company over the last couple years. It’s wonderful to see. But the key premise for me when I look at investing in a company and our fund looks at investing in a company is we have to be able to help. But the other thing that I love is when I no longer have to spend hours upon hours a week helping these companies because they’ve already figured it out.
Mark Thomann: So we have companies in our portfolio that no longer really require a lot of my time. And that to me is a win. But we’ll see exits in our first fund over the next year and a half to two years.
Luke Peters: Yeah. You mentioned they’re all growing, that’s a much higher, that’s more than a Ted Williams average right there, so, you guys are doing, you’re doing something right.
Mark Thomann: Yes. We are. But they’re not all going to make it.
Luke Peters: Yeah, I got you.
Mark Thomann: So we realized that. But we certainly have, we’d really helped a lot of them along. It’s not only our fund. We bring in a tremendous amount of advisors that either are LPs or are part of our advisory board who have different expertise and they have been equally impactful on these companies. So it’s not only about us, it’s about our LPs and the folks that come in and really help these companies with branding in particular. I think that was a one of your questions early on. It really is about marketing. We’re very good at getting into distribution, but the key is, how do you build a brand? How do you build a community? And how do you get people to continue to buy that product?
Luke Peters: Yeah, lifetime value. And Mark, before going on though, I wanted to get, because you mentioned some of these brands obviously you’re there to help, and you’re putting your time in, and then sometimes they reach escape velocity, you don’t need to help anymore, they figured it out. And I want to dive more into what that help looks like. But maybe we can use, specifically, because this would be great for the audience is well, I mean, you were a turnaround specialist, you mentioned, for 10 years. I guess, maybe not anecdotally, but just from what I’ve seen or heard, turnaround specialists will come in, they’ll find a bunch of expenses that should’ve been cut but weren’t, and they’ll cut those expenses.
Luke Peters: And then they’ll look at sales channels, and profitability per customer, and get rid of the bad customers. Is it like that? Or is it more than that? And what are the specifics? Because I think that would be really interesting to hear your philosophy and exactly what you did maybe as an example of a company.
Mark Thomann: Yeah, with the early-stage companies that’s in our portfolio, it’s more guidance and how to avoid bloating and hiring folks that are going to cost hundreds of thousands of dollars. It’s really about knowing who you are. And then avoiding some of the pitfalls that a lot of companies experience when they grow. And everyone of them experiences it. Probably our most successful company within our first portfolio is a company called Pacha Soap, I mentioned that earlier. Pacha is a beautiful brand of soap that you see in every Whole Foods. Usually it’s displayed on a table, and it has salts. And when you go in, you see, and you smell the beautiful Pacha Soap displays.
Mark Thomann: We have stores within a store in a number of Whole Foods locations, and they’re continuously expanding beyond Whole Foods. But if you look at the challenge of that company, I can describe the soap, but most people don’t know the brand. And more people don’t know the mission behind the company. And so what the company really needs to start doing and is doing at this point is going, they’ve really started building their direct to consumer business. But now it’s about brand building.
Mark Thomann: They’ve reached a critical mass in their maturation, where they have significant revenue, significant growth, significant distribution, great retail partners like Whole Foods. And now it’s about Pacha Soap becoming a household name. And so how do you do that? How do you build those communities? How do you get out the message that Pacha Soap may be more expensive, but last a lot longer and oh by the way, we’ve taught many Africans and South Americans how to make soap and sell soap and distill essential oils and provide a tremendous amount of money to their local economies to do so.
Mark Thomann: And oh, we also are digging wells throughout most of these companies in the third world to help to also not only educate on the importance of cleanliness, but how you can create these micro businesses. Incredible company, incredible founder, incredible product. But their challenge right now is how do you build the brand. So that’s what they’re trying to do at this time. But a lot of that has to do with the direct to consumer e-commerce business.
Luke Peters: Yeah. And I guess, and I was going to ask, what’s been your most gratifying brand relaunch? Would it be Pacha Soap? Or is there another example of … well, and I guess maybe that’s not a brand relaunch, but I know that’s part of your portfolio.
Mark Thomann: Yeah. That’s a not a relaunch. I’m hoping it is never a relaunch. But I would say within our portfolio is a brand called Slice. And your viewership will probably remember Slice Soda was a former PepsiCo brand that was, back in 1987, a little over $1 billion in revenue, in gross revenue. We acquired the rights to the brand a number of years ago. If you recall, or if anyone remembers, Orange Slice, lemon-lime Slice, it had about 55 grams of sugar in it. But it also had 10% real fruit juice, and that was really the reason I believe on that brand. It was the first soda to actually have real juice included. And a great growth story, and then ultimately it was discontinued and renamed Sierra Mist, which most people will probably know that brand.
Mark Thomann: We acquired the rights to the brand, and we repositioned it as a better for you sparkly water. So, we no longer have any sugar added to the beverage. The current product line has 25 calories only from the juice. And five to seven grams of sugar from the juice. So it’s not added. So in the next few months, we’re also releasing the two iconic flavors, the orange and the lemon-lime. It looks like those are actually going to have even less sugar and less calories.
Mark Thomann: So, we’re really excited about it, and we know that the consumer that we’re targeting is more the baby boomer. If you look at the brand awareness, it’s the baby boomers and the gen Xers, has about a 90% brand awareness overall. And if you look at that demographic, one out of every two baby boomer or gen Xer is looking to reduce sugar in their diet. So it’s perfectly positioned to be the drink that allows that demographic to stop drinking soda and find something a little sweeter on the marketplace. When I say a little sweeter, a little sweeter than LaCroix and the Spindrifts that are currently on the market that don’t have as much sweetness from the formulations.
Mark Thomann: But that’s one I’m very proud of. The product that we created delivers on that promise. And we look to have this brand north of 100 million the next few years, and hopefully exit.
Luke Peters: Wow, that’s a-
Mark Thomann: We do have a CEO though that we’re not happy with, he needs to be replaced, so we do look for sometimes when you don’t have the right management team, you look for talent. And so, we are looking for someone to help run that business. The CEO by the way is me.
Luke Peters: I was going to say, “Well, this is going to be an interesting episode here.”
Mark Thomann: But yeah, we do look for … I’m pretty good at building things, and creating the foundation, and then ultimately handing it off to someone that has real beverage experience and understands how to scale those types of businesses.
Luke Peters: Yeah. And by the way, I usually don’t give into what I do in my personal life on this podcast, but I will say, I think that’s an incredible beverage idea right there. Because I actually think you’re going to get more than just baby boomer, you’re going to get gen X, you’re going to get millennials, because the thing is, when people drink a LaCroix, whenever I look at these things, I just think, I just drink water, because I’m like, “What do I want to put a Coke into my body?” So I don’t drink that. And then sparkling water is fine, but the LaCroix I think, “Well, I don’t know what they’re putting in there to make it taste the way it is, I don’t know how natural it is, I don’t want to drink that.”
Luke Peters: But I always wondered why sparkling drinks don’t just add a little bit of juice, the consumer doesn’t need 45 grams of sugar. Five or 10 grams of natural sugar with a little bit of actually real flavor from juice would be a winning combo. And this is exactly what you’re doing. I think that’s going to be a massive hit with a huge audience. And many even kids.
Mark Thomann: Thank you, and it’s organic juice, so we do think that that’s important as well because of the amount of juice that we use, it was incremental cost in order to have organic. So we did think that was important as well. But I agree with you. I think it’s going to be more than just baby boomers, and gen Xers, but we do have a base that remembers the brand that will appreciate the pivot, because it’s the same pivot that we are all doing in life.
Luke Peters: Yeah. I mean, look, I coach kids sports teams, and even there, after a while, even go away from wanting the parents to bring snacks, because the snacks are so bad after the kids run around for 45 minutes, kicking the ball around. And so yeah, I think stuff like this is you’re going to have a massive market actually. Because parents all even want that for their kids. So congrats on that idea. And I do remember the brand.
Mark Thomann: Thank you.
Luke Peters: Yeah, back in the day. So, that’s a great case study of revitalizing that brand. But you still take a big risk, because you know this better than me, but I don’t … it’s not like you could just launch that brand and immediately have an audience. I mean, there’s a reason why it was on the … you were able to pick it up for probably a reasonable price. I mean, basically you had to insert some magic to make this brand work. But I guess you would rather have a brand that had some existing appeal than starting from scratch. That’s your plan there, right?
Mark Thomann: Yeah. And it’s a good example of how important marketing is. So, we partnered with a company here in Chicago called SRW, great at what they do, great at helping these emerging brands become bigger brands. They worked on Simple Mills here, and Kite Hill, so brands that are becoming household names. And we’re working with them, and they’ve changed their model from just being a fee-for-service model to really wanting to be an equity partner in the brand. And we’re thrilled to have them as part of the team, and we just understand how important it is that we retell the Slice story in a way that can really appeal to not only those that remember it, but to the millennials too, to the new consumers. So they appreciate it for what it is.
Luke Peters: Now, for these brands to succeed, as far as sales verticals go, I mean, I wouldn’t want to call it on the limited side, you have some direct to consumer ones, but in order to go big, or scale over, say, 25 million, do you really have to work with Kroger and Whole Foods? Is that most of the time?
Mark Thomann: Yeah. This is really the natural channel, and then we have great relationships with the distributors like KeHE and UNFI for the natural channel. And the natural channel, when you look at it compared to conventional, is very, very small. But it’s a great plan building channel. If you can make a brand work there within our portfolio, it’s a lot easier than to go the conventional grocers and alternate channels of distribution, club, et cetera. But the natural channel is a great way to build a brand, and build those communities, and it’s one where most of our brands come from.
Mark Thomann: The other group, we have a great relationship with a great, with a lot of brokers, and we try to be not only distributor agnostic, but also broker agnostic. Presence Marketing is one of the leaders in the natural channel, we have a great relationship with them, and we have great relationships with other regional brokers, and other brokers throughout the country. We have a great relationship with a broker up in Canada, so those relationships are really, really vital. But I would say that most of our brands do start in the natural channel. And then we look for accounts that help us grow even bigger.
Mark Thomann: But you can’t really get to that $100 million level with the natural channel alone. You really have to start preparing these brands for conventional, and you have to look at price points and so forth to make them more salable when you start talking to the Walmarts and the Targets and the Krogers, and the Albertsons, and Safeways of the world. So, it’s a challenge, but we’ve done a pretty good job preparing these companies for that migration over to more conventional.
Luke Peters: And how are these companies thinking about profitability along the journey? So they’re trying to scale to 100 million, it sounds like that’s one of the numbers to hit because then you become a better acquisition target. Are they having to maintain profitability, or are they picking up other investments along the way after the Series A and so it’s more about building the brand and top line sales? What does that mix look like?
Mark Thomann: I will tell you, it really is dependent upon category. If I looked Pacha Soap, we invested at them when they were much smaller than they are today. But they were profitable, and it was mainly because the founder grew up in a farm, had this desire to make his business profitable, cash-flowing. We don’t see a lot of that in the early-stage world, but with Pacha, it’s a wonderful story, wonderful founders, and they’re in the middle of Nebraska. Hastings, Nebraska, where they’re much more practical. And we actually, our first million dollar plus investment in Pacha was really to clean up cap table, they had a lot of local investors that were more focused on things that generate distributions rather than seeing an early-stage company grow.
Mark Thomann: So, it wasn’t until four or five months ago that we invested along with another fund in their first Series A. So that’s a company that’s always been focused on cashflow. But when you look at these emerging brands, you have to spend money in marketing. And in certain categories, it’s very, very difficult to actually create profitable enterprises until you exit to the big companies that can reduce cost significantly to make it all work. Beverage in particular, extremely challenging for small brands to make money. Because they don’t have the DSD network, they don’t manufacture themselves, they just don’t control the things that ultimately reduce cost.
Mark Thomann: We look at … you’ll like this business, it’s called Gekks, G-E-K-K-S, we invested in them about a year ago, but it’s a direct to consumer business. They do no Amazon business, it’s all on their own website. They did close to $5 million of revenue direct to consumer. But they’re inventing products. And it’s that education that’s extremely difficult. It’s an insert that goes into your shoe that’s woven with silver and because of that it takes away the odor. Incredibly ingenious product that requires tremendous amount of education, but they’re currently not in any retail, traditional retail doors. But that company was profitable day one.
Luke Peters: Yeah. Yeah. Well, that’s cool. Yeah, silver is a microbial side. So, that’s interesting. Now, how come they’re not on Amazon? But the thing about, I get why brands don’t, I totally understand why, but the things is, Amazon is such a massive market, it’s almost like they’re forcing you to be on now, because you can catch so many eyeballs, and you can build a brand. Then you got to deal with the billion knockoffs. But I wonder what’s their decision not to be on there.
Mark Thomann: They will go there. I think they needed, they were more concerned generating positive cashflow. And unlike a lot of founders, they looked at immediately … this was their living. So they paid themselves a decent wage. A lot of these founders, when you look at their financials, and they their projections, they’re waiting to have a base salary until years down the road. But if you look at most of these companies are, they’re continuously trying to grow. And in the case of Gekks, they just haven’t figured out how to crack the Amazon code. And they didn’t want to sacrifice margin. They do now, and they need someone like you to help them figure that out.
Luke Peters: Yeah, actually, they’re probably going about it the better way, I can guarantee you that. Because most companies do the opposite. They go to Amazon, they don’t build a brand. And then I’m telling them to go build their website brand, get an email list, own your own customer, create your community, all the things you talked about. So what they did is actually the much more difficult part, going to Amazon is quite a bit easier when they’ve already built a legitimate business. But wow, I can talk about these businesses all day long. Thanks for sharing all of these ideas. But I think at this point, I think it would be great if you could share with the audience if there’s maybe a big failure, maybe a really tough one that you’ve learned from or maybe it improved yourself or your business.
Mark Thomann: Sure. Yeah, failures, they’re inevitable most everyone’s lives. And for me, on the dormant brand side, years ago I acquired from Unilever the Salon Selectives brand. Salon Selectives was really the first shampoo, conditioner brand that customized your hair, so if you had straight hair, you got a certain number, if you had curly hair, you got a certain number, et cetera. You mix to match sort of your hair type with the product. In its heyday it was four, $500 million brand. Helene Curtis here in Chicago launched the brand, and then ultimately sold to Unilever, and then ultimately Salon Selectives was discontinued and I acquired the brand directly from Unilever.
Mark Thomann: My real mistake was I brought in the old team from Helene Curtis. Great, wonderful people. I don’t want to blame them for the failure, because they did everything they could possibly do to make it successful. And they did a great job getting it to a point in a much more traditional CPG way. We had incredible products, I think we were the best new product in town in the market back in 2008. And then the market failed. The bank went out of business. We were stuck with no line of credit and then I put my restructuring hat on.
Mark Thomann: Ultimately had to figure out how to save that business, and it was an incredibly stressful time in my life, and the brand, without any financial support, we had put millions of dollars of equity into the business. Really, really challenging. And back in 2008, the financial markets weren’t what they used to be, liquidity was scarce, and debt was even scarcer, and ultimately ended up finding a way to get all of our money back, but frankly it was an incredible learning experience. And I didn’t end up owning the brand that I thought we were going to create into a category leader. But it was a failure that taught me about resilience, and taught me that I still had the ability to think out of the box and ultimately save that, the brad, and still exists today, but it wasn’t what we had initially invested in.
Mark Thomann: But if I looked at it from a business standpoint, it was my greatest failure. But I learned a tremendous amount from that business, and I don’t think I would ever spend for traditional advertising anymore. We were buying commercials and doing everything the big companies do. But when you’re an early-stage company, you have to act that way. And so, part of the problem was, we were building it like it was still owned by Unilever. And my greatest learning from that experience is you still have to be gritty, you have to be incredibly frugal with how you spend your money. And you have to measure every dollar you spend with an ROI. And don’t pay people a lot of money to do it.
Luke Peters: That is a great lesson right there. Measure every dollar you spend. No, I love it. That’s a great way to wrap this up, and it’s been a great discussion, and talking about so many brands. How can folks get ahold of you? I’m sure there might be some brands listening here that want to get in touch with you. Is there a LinkedIn, or website? Where should we send those folks?
Mark Thomann: Yeah. LinkedIn. I give anyone and everyone 15 minutes of my time. That’s a policy that drives my partners crazy. But I feel that that’s something that a lot of people don’t do, and if entrepreneurs want to call and use me as a sounding board. I can’t promise I’m going to call them back right away, but I do allow people to talk to me, and I’ll give them guidance and so forth. The website is spiralsunventures.com. And my email is mark, with a K, @spiralsunventures.com. Spiralsunventures.com.
Luke Peters: Yeah. And we’ll have that in the show notes for the audience, so you can go over to retailband.com and then the podcast will be there and we’ll have that down in the show notes. Well, it’s been a great discussion, Mark, I learned a lot, I took a bunch of notes here actually, and I might even have some followup email questions to you later on.
Mark Thomann: Great.
Luke Peters: Yeah, I’m going to go look at Gekks, I think that’s a really cool idea for a product brand. So I’m going to see what they’re doing on their website. And you mentioned a lot of other cool companies, the soap brand. So very cool stuff here. I learned a lot. Thanks for sharing everything here. And also want to thank you all for listening to this episode of The Page 1 Podcast sponsored by Retail Band. And quick reminder that I’m offering a free valuation of your online sales strategy. We take a look at your digital strategy on Amazon, or Home Depot, Wayfair, or any of your other channels. We can see what type of selling tools you’re utilizing, also look at your influencer marketing strategy. Or if you’re not using one, see if it’s a fit for you.
Luke Peters: If you’re interested, find me on LinkedIn, or email me at Luke@retailband.com. And again, I want to thank everybody for listening to The Page 1 Podcast. All your reviews and comments are truly appreciated and we’ll see on the next episode.
Speaker 1: Thanks for listening to The Page 1 Podcast with Luke Peters. If you like our show and want to know more, check out our other segments. Also, please help us out by leaving us a rating on iTunes. Want to learn more about r-commerce? Check out www.retailband.com to get more great tips and tricks on how to accelerate your e-commerce sales with the big box retailers.
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