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Unless you have 5 million plus on the balance sheet that you can use for marketing, that product's never going to turn. We built it from 7 up to 50 million, but never made a dime of money.
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Tyler Mayorez is one of the most influential investors in modern food and beverage. As managing director at Manitree, he backs brands at the intersection of nutrition, longevity and that can scale. He sits behind health Aid, Gotham Greens, Vital Farms and the new Primal. Brands that didn't follow the wellness movement.
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They defined it back then. If you could build the $50 million you could sell nowadays, everything's kind of flipped on its that now CPG is really looking to acquire companies $200 million plus and they want to be strongly profitable.
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Tyler, thank you so much for coming on the show and for spending time with me. How are you?
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A
Good, good. Thanks for having me. I'm excited.
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B
Oh no, it's an absolute, absolute pleasure having you on the show. I wanted to start from the very beginning. What got you interested in studying agriculture, sustainability and food?
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Yeah, so I started as a private equity investor as a generalist many years ago and it was around 2013. I was actually in between gigs and I was working in turnaround consulting and working on a farm. Bankruptcy actually. And that's when I first learned all that corn and soybean on the side of the road that we drive by in the Midwest, none of that's fed to humans. None of it. It either goes to animals here in the US or in Dutch China. In China. And that was a eye openening experience to me. And so I started to read a lot more about sustainability as a result of that. And that kind of led me into the whole investing in food. And I started as an angel investor and then I joined a private equity group focused on food and agriculture in 2015. And so that's really been my sole focus ever since then.
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B
How is, how was that transition going from a generalist investor to focusing on food? Was that, was that hard to do?
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You know, it transitioned. It took time. So I spent several years in consulting around several different aspects of the food industry. So I got acclimated to food that way and I had had one investment early in my career in food. But yeah, just. It was an, it was an easy transition after I had laid all the groundwork and learned about the industry.
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Got it. And, and, and that investment before was that. Was that bro Boca Burger.
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Burger.
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Is that right?
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Yeah, way back.
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Tell me a little bit about, tell me a little bit about that, about, about that investment, how it came to be because that was one of the OG plant based.
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Yeah, it really was. We had, we were working, I was at a company called Ridge Capital at the time. We had a management team that was looking for a new deal. They had just sold Brooklyn Bagel Boys. I found this business that really a really successful founder who had built a business. It was $7 million he had, I think, I think he had like two to $3 million of EBITDA. So it was really, really profitable. But it was basically just him and his secretary and a whole bunch of workers in a plant down in Boca Raton, Florida making these burgers. And so we ended up buying it. We built it from seven up to 50 million over three and a half years, but never made a dime of money. We got rid of all the profitability because we were trying to expand so fast. But there was a really, it was a different era and it was a really different model back then. You just, if you could build the $50 million you could sell to a big CPG and they would buy for two times revenue. And that was just the formula nowadays of course and you didn't have to make any profit. I mean you didn't have to be profitable. And nowadays everything's kind of flipped on its head. Now CPG is really looking to acquire companies $200 million plus and they want them to be strongly profitable. 10% EBITDA margins and above. And so it's just a very different world. But it was a really eye openening experience for me and I really enjoyed CPG and learning all about the food.
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B
Yeah, I mean totally. I mean there's a number of things to get to as well. Cause I'd love to talk with you about with Boca Burger and just generally what, how maybe plant based burgers have maybe flipped a little bit in terms of they were. It seemed like great businesses or businesses that were doing really well and then public perception might have changed and, and we had quite a bit of a rocky era if that's fair to say in the, in the past few years when it comes to plant based burgers. And also as well would love to also discuss too like why that flipped when it came to strategics or, or those that, or even private equity groups that want to buy these businesses that originally didn't maybe care about profitability and now that is vital and EBITDA has become very new normal. I think maybe let's start with the plant based burger side if that's all right. And in kind of your thoughts around, around plant based burgers and that Whole kind of trajectory and the ups and downs. What were some of your learnings through that?
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Yeah, well, so this was one of the very first iterations of plant based burgers back before beyond meat and whatnot. And, and we had the benefit of. Back then there was another company called Garden Burger that was really spending a lot of money and on top of funnel advertising, they actually advertised on the super bowl and so we really benefited from that. They pulled the whole category up and we were, we were a winner as a result of that, which was great. I think to a certain degree the plant based burgers, when you think of impossible and beyond, they had a very specific focus around sustainability and I think they lost their way a little bit. You know, they really, they created products that weren't that much better than big CPG was creating. Very ultra processed, lots of fillers and additives and that's just not where the world is today. And so they kind of lost their way. And you know, I think they got corrected as a result. Now they're trying to change their ingredient labels and things like that to respond, but they're pretty tainted at this point.
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B
Yeah, that's a fair point. I, I do think what's a bit challenging about plant based burgers is that they're. I sometimes I feel, and I'd love to hear your perspective on this, sometimes I feel like they're compared to obviously the meat. The. Well, I, I guess that they're the, the alternative but I guess the quote unquote main product, meat product equivalent, which is, you know, ground beef. What's interesting is that ground beef is typically not, you know, the best part of, it's not the, it's not the best part of, of the cow. It's not actually. It is processed. So these, these are the same time. It's not like the health, the, if you, if you think of, you know, all the different maybe parts to, to meat, it's not like ground beef is the healthiest part of the actual of, of meat. If you do think that meat is know, healthy, whatever that kind of means to you. But you know, and so saying that plant based. Oh well, it's really processed. Well, the equivalent is also pretty processed too right on the meat side. So it's not quite like a fair comparison in a lot of ways.
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No, but they were the upstart coming into the industry and so they needed to be better for you and much more sustainable. And they frankly they were more sustainable but they weren't better for you. And that I think is really what Hurt. That totally came around.
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B
What is better for you in your mind when you're, when you're thinking about brands, when you're analyzing products, what is better for you mean?
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Yeah, well, let me step back first and just talk a little bit about our mandate because I think to understand how we think of it, you really don't understand what we invest in. And we strictly invest in companies that we believe improve human health through either nutrition or wellness and, and generally trying to empower consumers to live better, longer. And so it's, it's a lot about longevity and, and diet, etc. So that is the number one focus for us. When we look at a new company. We're looking at the labels and we're going and taking a look and seeing what's in the product, how is it made, what are the nutritional factors behind it, and that helps us to gauge if this is something that really fits our mandate or not. So better for you can be. It could be something that has sugar, but it's a lot less sugar than the alternatives. Or it might be, you know, non alcoholic beer might be considered better for you because it doesn't have the alcohol effects of real beer. You know, so that's kind of how you.
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B
Are there certain ingredients that you would actually, if a company had those ingredients in it, that you would write them off and say, heck no, we, we, the. This is not better for you. We cannot invest.
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Well, we, we don't invest in alcohol and cannabis, so that those would be number one. And that's partly a couple of our LPs.
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B
What about, what about THC infused beverages?
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A
We cannot invest in those. I've invested in those. Personally, I'm an angel investor in one and it's been a little bit of a turnaround in my thinking because I'm fairly negative on alcoholism as a, as a societal product. But we can't as investors for our fund, invest in those. You know, I don't know that. I mean, there are definitely ingredients that are red flags. Sucralose would be one. You know that it, we've had several conversations as a group about different companies that have sucralose. If it's a very small amount of sucralose, I think we would still consider it if it was a good investment overall. But if sucralose is the number one or number two ingredient, I think we would probably pass on that. Just, it's, it's been something that's come up quite a bit because all the energy drinks unfortunately have it, even the ones that are kind of considered clean and it's just one that we've had a little bit of trouble with. But it's, it's not a complete non starter but it's definitely an area that we would probably avoid. I think we're probably avoiding the nicotine too. That's another area where you've seen kind of nicotine become a health product, which is interesting. Yeah. And that's probably not for us. Yeah.
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B
So what do you think of the trend, I would say particularly in beverage of instead of having low sugar or no sugar, you instead have like Stevie alternative or, or others. Are you, is that, is that interesting to you or. Cause I've, I've heard it kind of both ways in terms of if it's actually a better for you product if you have, have, you know, those types of ingredients.
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A
Yeah, I mean we've, we've looked at several investments and actually Health aid had Monk fruit. They didn't use stevia, but they used monk fruit and plant people. The company that we just invested in uses maltitol, which is a sugar alcohol and we did a lot of research on it and it's perfectly safe. You just probably shouldn't eat 30 or 40 gummies in a day because it could create stomach issues. But they're short term stomach issues and it's not, there's no long term effect. So it just depends on the particular ingredient. We're fine with stevia and some of these other natural things. I think the thing you have to really look at is one, how the product tastes. Because if it tastes bad then there's an issue. There's some certain percentage of the population that really has a negative reaction to stevia and monk fruit. Both. Both. And I think it's smaller for monk Fruit. But you have to be aware of that.
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B
How, how do you analyze when you're, when you're looking at a brand, how do you think about the overall marketing? Because I know that in order for you all to get interested, as you, as you mentioned, there has to be a better for you part when it comes to the actual product itself. How do you think about call outs when it comes to the marketing balancing that is better for you, but also that you know it tastes delicious and you know at the end of the day it is, you know, a brand, you might want to have fun with it. Right. So how, how do you think about should, should sustainability kind of be a priority in terms of the angle and the positioning? How do you, how do you think about that?
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A
Yeah, it's a good question. We've done a fair amount of research and ultimately consumers react or purchase based on what affects them. And we found that sustainability is probably a lower priority than dietary benefits. So for instance, a great example is our beef company, Verde Beef. They are, are the only brand in the US that's organic, grass fed and regenerative. And they used to lead with grass fed and regenerative and they did a lot of market testing and ultimately what people cared about was it's organic, it affects them because it has less chemicals, it's better for their health. Great. That it's also good for the environment, but that's less of a factor. And now organic is the thing that they lead with and it's the biggest thing on the biggest call out on the package. So I think you have to first lead with what affects the consumer and that's really comes down to taste and their health.
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B
Yeah, no, that makes, that's really interesting too. That, that was, that, that was that organic was actually the, the call out that, that. That consumers were kind of most interested in. Yeah, that resonated.
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A
Yeah.
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B
You've also, I know that you've been open about going plant based. What initially inspired you to go. To have a plant. Have a plant based diet?
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A
Yeah, well, first of all, let me just say it's. It's a singular decision for me and I don't, I don't prescribe to any one diet for any. That it's the best diet for anyone. I think that everybody's factors are their own and it's very personal decision. So. So for me I went originally it was a climate related decision but over time it became health and I lost a lot of weight. My health markers improved. I feel like it's better for longevity just eating a lot of different vegetables and so that, so for me it was really good. But at Manitree we don't prescribe to any one diet. We're very diet agnostic. We. I think there's only two of us that are plant based at the firm. We've got some Paleo folks, we've got a lot of people that are just moderate, moderate eaters and that's, you know, so it just depends on the situation. But we don't invest around any one diet by any means.
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B
No, that makes sense. I mean you also just mentioned a meat company prior.
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So makes I sit on the board of dude meat companies New Primal and Verde Farms. So yeah, it's not, it's not philosophical as much as what's right. For me personally Right.
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B
That makes, that makes a ton of sense. What do you think is misunderstood about plant, plant based diets and maybe plant based alternative products? Maybe this goes back a little bit to what we were talking about earlier about, about plant based burgers. But, and maybe that's the problem that when you think of plant based alternatives you think only plant based burgers. But what do you think is kind of misunderstood about plant based diets overall?
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A
It's a good question. I, I, well, I want to hate the diet is so political like so much of American culture because I don't really think it should be. I think, I think if most people kind of prescribe to the moderation adage of Michael Pollen, you know, eat food, not too much, mostly plants, I think they'd probably be all right and that's probably best. But I think the key to plant based eating for me anyway and I think the most important part of it is that it's very healing and that I think no matter what your diet is, you, everybody should be eating leafy greens, cruciferous vegetables, berries, nuts and seeds kind of every week because they've the antioxidant principles of those and the gut health benefits are tremendous. So that's really what matters to me. And no matter what your diet is, you should be eating those vegetables.
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B
No, I, I agree. I also, I also just think as well obviously taste still the most important driver to a lot of the decisions we make when it comes to food. But I think also, also understanding how you feel after you've had you actually digest and how you feel afterwards and saying oh wow, I don't, I feel pretty sick. Maybe I should, maybe I shouldn't actually consume that. That's what, at least that's what got me like stopping drinking like, like, like a long time ago just because it just made me feel sick afterwards and I was like oh this maybe isn't, isn't is it for me. So it's just one of those, one of those kind of things. Why talk a little bit about cool beans. Why did you want to start and ended up starting a vegan burrito company?
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A
Yeah, well, it was interesting because you know I, I mostly eat whole food plant based so I'm not eating a lot of the processed foods. There's a couple exceptions that are very clean ingredient that I'll eat. But for the most part I'm doing a lot of cooking of my own food and whatnot. And at that time there really wasn't anything. There were maybe one or two products that were whole food Plant based in the grocery store. And so our idea was let's bring that so that it's an easy way for people to cook something up really quickly in the microwave. Lot of factors, you know, why that didn't make it and including one of the biggest being that it was frozen. And frozen is really hard place to compete. Um, but that was the reason why we did it. And the great news is now while we failed as a brand, the, the great news is that there are a lot of whole food plant based alternatives in the grocery store now for people that do want to eat that way. So we feel like we've had a little bit of a hand in that expansion.
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B
Why, why do you feel like why do cool beans not, not end up working?
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A
Yeah, and, and to be fair we, we sold it to actually a meat company called Jensen Mead and they may relaunch it. I'm not sure what they're doing. They have a plant based division but you know, and it's really a factor for startups in general. It's really hard to start a product and launch it into grocery stores. And so I usually advise founders that are in shelves with shelf stable products or even like semi fresh products to start with DTC and E commerce sales because you can scale that business much more profitably and with less capital early on and maybe get to $20 million before you go into grocery stores. Because grocery is very, very expensive. In addition to promotions, you pay slotting fees, you have distributor fees. I'll give you an example. I mean when you think about a product, say your product cost is a dollar. If you go through the two main distributors and then sell into grocery stores, it's probably going to show up on shelf at $4. It's a four times multiplier. If you can go direct like to Kroger or Walmart or Costco, there might be a three times multiplier but it's still, there's a huge multiplier because people getting profit along the way, the gross margin along the way from all the different players. And that's just a, it's, it's, there's very little profit in it for you at the end of the day and you need to be able to have good unit economics. And so it's, it's enough uphill battle and starting in frozen is even more of an uphill battle. So that was probably the biggest reason and it was a little too niche oriented I think. You know, we, you needed to be a little more mass market to, to really grow.
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B
Got it it makes a lot of sense in terms of what you. What maybe the are are, are the foundations that you need in order to have a product in retail, let alone in a. In in kind of a really tough tough. I mean frozen is also obviously really hard as well since you have to have a frozen supply chain too. So then you have you factoring that.
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A
As well and it's hard to. It's hard to advertise behind glass. So. So whereas in the shelf stable part of the aisle you can have shelf talkers, you can do all kinds of call outs and things. You can't do that behind glass. So it just makes it even more hard to, to create brand awareness.
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B
If you, if you started it today, what, what would have you done differently? Would you. What do you have trouble.
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A
I wouldn't have gone.
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B
You wouldn't have frozen period. Okay.
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A
You can't. You really. There's no real way to do E comm and frozen. It's not. And even fresh is hard. Like there's very few people that are doing it well and fresh. So it really needs to be shelf sable. So I would have probably done some kind of a retork bag and done bowls instead of. I would not do frozen to start.
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B
Yeah. When. Whenever I think of the only successful and I'm sure it's not the only successful but when I think of frozen ecom companies it seems like meat companies are the only ones that have kind of cracked it when it comes to frozen company. Like you have a frozen supply chain, the meat you know is, is frozen and then it's delivered to you like a butcher box for example or something like that. Where on the heath Hummer side has done really well, but I haven't seen it kind of happen in other.
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A
There's a company called Wild Grain that's doing really well that does breads. They do sourdough breads in a box format. They do pretty well. So there are people that are doing it. It's just. It's really, really hard and it's going to take a lot longer to get there.
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B
So I know that you mentioned that you're a big believer in whole foods.
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A
You.
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B
You eat mostly whole foods foods. However, when investing in snacks or can or I know that you do invest in snacks. Typically snacks are processed. How do you reconcile that? How do you think about what is maybe too processed or overly processed versus versus snacks that are less processed that are. You're more comfortable with that that still maybe has a sustainability side that. That you're attracted to?
- [22:55]
A
Yeah, it's a. It's a really good question. I think we think about it more as. I mean there's processing in almost everything. So we think it as simple processing versus ultra processed. And it's really a lot of times about the ingredients, gums and fillers and preservatives and all these things that old line CPG companies have in their products that are really highly processed. So a great example is plant people. The company we just invested in. They make functional gummies and they focus on specific day parts like Wonder Sleep or Wonder Focus or Wonder Call. Well, they have really simple ingredients that include natural herbs that are backed by science, you know, as to their effectiveness and then they're made into gummies. And of course it's. There's a process to making gummies. So there is processing, but it's a pretty simple process. You basically mix up some ingredients and you put it into a mold and then it gets cooked. So it's not ultra processed by any means. It's a simple processing. So that's how we think of it is more around simple processing.
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B
Got it. Do you. Do you find that when it comes to supply chain side, do you find for simple pl. For companies that do simple processing that are interesting to you, do you find that they tip that are that more likely they're actually self manufacturing or are most of them still using comands?
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A
I would say most of the companies that you're going to see emerging brands are still using comands. There's a few that. That make their own but it's hard to get to a. Like Little Sesame is a great example. Little Sesame makes their own hummus. It's hard to do that and get to a size and scale where it makes sense and you can do it as efficiently as a Koman does. So I think a lot of people start with a coman. They make the consideration later should we be making this ourselves? And they keep coming up against the same factor that our co manage can make this much more efficiently than we could. So let's just keep going.
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B
That was helpful. What signals when you're talking to and interviewing founders or having conversations with founders, what signals tell you that a founder is genuinely aligned with improving human health versus just using it maybe as a marketing angle?
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A
Yeah, well, first, I mean, you know, as I mentioned before, we really focus on the labels. So we'll do a lot of looking at the ingredients and the nutrition makeup of the products and that gives us a pretty good sense of whether they're. Whether it's just marketing pizzazz. Or whether it's real. And that's, that's probably where we center on is what, what are the actual products. So to see if it's aligned with us on our and our philosophy. I remember one example. I, I, it was actually a plant based product. It was a company that was making a frozen plant based product, tasted really good. But then when you looked at the nutrition labels, it was 70% saturated fat because of the ingredients that they had in and everything. And I was like, wow, I don't even think I've seen CPG companies that are 70% saturated fat. That's a lot. And you know that's, that's going to be a different kind of alignment than we're, than we're focused on.
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B
How do you also think? Because when I think of these types of companies in food and beverage it's easy to think of, you know, in terms of retailers, distributors, it's easy to think of like you know, the whole foods of the world and sprouts of the world, the natural channel. But of course you also need to cross that chasm, right? Especially if you're venture backed or growth equity backed into the Walmarts, the targets, the Costcos. And I know that those retailers have become a lot more receptive to actually bringing in more natural companies that perform really well. Natural. But how do you think about crossing that chasm and whether a company like if a company comes to you and they're natural, how do you think about can they cross that chasm going from natural to conventional in mass?
- [27:01]
A
Well, it's a big discussion in every one of our IC meetings and just in our whole due diligence process, we wouldn't invest in a company that wasn't going to be both natural and conventional because we need them to get to a size. We're looking to grow companies to 150 million in revenue and you just can't do that natural alone. It's too niche and it's not a big enough world. So it's, it's an important factor. We'd love to see a proof point if there's one available even if it's one chain where they've already started to sell. But if not, and sometimes there's not because we are doing seeing a lot more businesses that are 100% E commerce and they're 50 million in revenue and now they want to go into retail and we'll help them get there. And so we're going to just have to buy in and probably there'll be a lot of looking at the economics. We might do some survey data with, with one of the companies that we work with or something like that to get a sense for how conventional customers think about these kinds of products. But you, they do need to make the crossover like a good culture made it crossover. You know when we first invested in that they were 40 million in revenue and only a natural and eventually they made that crossover and now they become a big $200 million brand. But you have to make that to get to the size we want to see companies get there.
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B
Yeah, I know that's a great. Thanks for, thanks so much for, for mentioning good culture. I was just going to add what types of products do you think or what kind of company needs to have that are performing really well in natural in order to you think have a chance when it comes to going to conventional or going to mass. Like what do you see for example, have you ever been like really, really interested in a product but thinking hey this product actually I can't, I can't invest because I just don't think it's performing really well in the natural channel. But I just don't think it will, it will actually perform in, in mass and conventional to.
- [29:02]
A
We have, we have walked away from a few where the price point we just thought was too high to ever get to mass and that, that can happen for sure. We, we do a fair amount of work and, and really what the difference when you go to mass. The real key is top of funnel brand advertising. You're going to have to, you're going to have to build brand awareness and so you're going to have to find ways to do what you know there. Especially if you're used to E commerce and it's really E commerce advertising can be very roa, you know, return on ad spend oriented roas and then all of a sudden to make that switch to top of funnel brand advertising is hard because it's really inefficient and it's going to be inefficient because you're just trying to mass market to a whole lot of people. But you've got to be able to do that. What we would really look at from that from a natural perspective is how strong are the black velocities. If their velocities are dramatically better than the category or dramatically better than other alternative foods that are similar, then we have a pretty good feeling that we'll be able to find a format and price point that'll work in mass. And so we focus a lot on that for sure. But ultimately, you just need to do a lot more advertising to make that transition to conventional.
- [30:26]
B
Do. Do you find that the shopper that would shop at natural grocery stores, do you think. Do you find that as blending when it comes to natural, like a shopper that would shop in natural versus a, A. A shopper that would shop conventional? Or. Or do you still think that it's quite different?
- [30:42]
A
No, I definitely think there's overlap, and it's a lot more overlap now than it was 10 years ago. If I just think of our household, and we're not by any means representative, but every weekend I go to Juul and Whole Foods, and my wife does shopping at Costco, usually for home delivery. So we're definitely hitting both. And, you know, most of the people that I know would have done. Have shopped in both over the last year, so that's helpful. That's.
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B
Yeah, that's really. I mean, I was thinking about my own. My own consumer habits and. Yeah, for sure. I shop at Trader Joe's, Whole Foods and Costco predominantly.
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A
Right.
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B
Those are th. Those are my three. Try to do the majority.
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A
Trader Joe's is an interesting. Where do you put that? Not natural, but they're somewhere in between natural and conventional. It's a unique animal.
- [31:36]
B
100. 100%, I feel. Yeah. Trader Jose is very unique because I do think in terms of their positioning, they're more natural. But at the same time, you don't have. You obviously don't have brands, I mean, brands in there besides, you know, Trader Joe's brand. It's very, very hard to. Hard to kind of.
- [31:58]
A
Yeah. I wish they did more brands because there's a lot of our brands that would love to be in them, but. Yeah, it's not. It's not really a great retailer to sell brands to.
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B
Totally. Todd, I know that you mentioned this, how you invested in Boca, it scaled it. It was profitable, I think. What it was like 8 million in top line and then 2 million EBITDA. Is that right? When you.
- [32:19]
A
Yeah, it was around that. Maybe a little more profitable than that.
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B
Even on.
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A
Crazy.
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B
Unbelievable. That's. That incredible. And then, of course, you invested and.
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A
Wiped out all the ebitda, and you.
- [32:30]
B
Wiped out all the EBITDA and pumped it, and then you got to 50 million revenue. Right. And you sold out to Kraft for still, you know, 2x revenue. So that's incredible return. Incredible return. Incredible return. Obviously, as you pointed out, the markets changed. Changed very much. So in terms of strategics, that doesn't really happen. You have to be profitable these days or you have to be spinning out ebitda. What do you think sparked this very dramatic change? And is there a transaction or two that you could point to? And you say because this deal maybe didn't work out for Strategics. Right. That it was. The company wasn't profitable. Strategics bought it at a very high price. It didn't work out. That this maybe changed the thinking when it came to Strategics. Is there a deal or two that kind of sticks out that you think that changed the market?
- [33:24]
A
There's a bunch of them. But I think the real factor is if you are a brand with 50 million or even 70 million of revenue and you, you're not profitable or you're break even and you go into $4 billion ABC, CBG company, you have to ask for resources every year for more marketing so that you can double in sales. And for you to double in sales, you've added 70 million of revenue. But let's say you needed $10 million of marketing to do it and you didn't generate that marketing, so you had to go ask corporate for that marketing dollars.
- [34:05]
B
Right.
- [34:06]
A
They could have taken that $10 million of marketing and put it on whatever their hero product is and probably generated 200 or a hundred million dollars of revenue. And so they can't get resources if you're too small. The way it works. For to be a benefit, you need to go into a company with 250, 300 million of revenue and your own EBITDA, 15% EBITDA margins or whatever, and then you have plenty of your own marketing dollars. You can continue to grow at a 40%, 35% rate and you don't have to talk to corporate and ask them for marketing dollars. That's what I think the CPGs realized. If these companies just get orphaned within them and I mean you could point to a million of them. Epic Bar, Justin's Crave Jerky. They all, they just got orphaned because they went in too small and they didn't have the marketing dollars to continue to grow themselves. And so they just got shut off. Boca Burger is a great example too, by the way. They were 50. They probably went to 100 million right out of the box because they extended the SKUs and everything and got a lot more shelf space at Kraft. But I was talking to somebody about three or four years ago at Kraft and I said that I did this Boca Burger transaction. I told her the size when we sold it. She goes, oh, it's nowhere near that Now. It's like $10 million in revenue. So it had done a complete round trip and that's all because it got starved for re. Because it didn't make money, didn't have its own marketing dollars and it's going to get starved. So I guess that's the thing is it doesn't work to sell until you get big enough and you're profitable.
- [35:46]
B
What's interesting about what you're saying I think is it seems like what then the goal for strategics or what strategics want when they buy the brand is essentially have the brand be independent, right? In that, in that they're spinning out their own ebitda. They're rein, they're recycling that, reinvesting their own brand but they don't actually used to you then they bought the company but then they don't have to use any of their own capital again to keep to, to keep the brand going that the brand can actually run independently themselves. They don't actually just like all the.
- [36:19]
A
Other products because that's how they operate a cpg. They're all independent little business units and they all make their own decisions. And so you know, if you look at all the transactions that have happened in the last 15 months. C400 million in revenue. Simple Mills 240 million in revenue. Alani knew was over 200 million. Poppy Poppy 500 million in revenue. All of them were profitable and basically standalone and it made sense to go in and they can continue to build those businesses with some of the resources of Pepsi or flowers industry or whoever but they've got their own marketing dollars to generate their own growth.
- [37:01]
B
Is that helpful for you in the position that you're sitting that you use as a investor?
- [37:05]
A
It actually so I consider us kind of a middle tier private equity. So we're not early stage, we're later stage and there's a whole bunch of people that help grow companies from pre seed seed series A up to where we sit and we invest 20 to 40 million in the middle and we basically when we're investing it's usually some money into the company prior primary and some money secondary to early investors and maybe the founders taking some chips off the table so they can go buy a house or whatever it is. Now what's emerging is a whole nother set of private equity groups that used to be middling and now they've moved up market and they're basically an exit potential for us. So they want to invest 100 to 150 million, maybe even bring debt in to profitable company brands that are in that 100 to $200 million range and then they'll take them up to 4 or 500 and sell them to big CPG. So we've got this kind of bifurcated market that's emerging and we're playing in the middle of it. But our exits are going to be. Oftentimes we might sell 80% to one of the big guys, TSG, Catter, BMG and then they'll take it up to the next level. We'll still be riding but ultimately it'll go to a CPG when it's much bigger and much stronger to fight for resources internally.
- [38:34]
B
And when you all invest is that's minority positions, is that right?
- [38:39]
A
It could be both. We certainly do large, we do large minority. We don't do anything probably less than 20%. We want to have large minority or majority.
- [38:49]
B
And so you're investing 20 or 40 million in a company. What typically needs to be. And I'm sure it all changes and.
- [38:56]
A
That would be our investment. We all sometimes have co investors that make it bigger.
- [39:01]
B
All right guys. So like from our up.
- [39:03]
A
Yeah, could be bigger.
- [39:05]
B
Okay, so. So the overall round size is typically 20 to 40 million in that and it could be like call like a series, series C, series B, Series C maybe.
- [39:16]
A
Yeah, you don't really look. Yeah, it's kind of like, it's almost like a recap transaction where some early investors want to take some chips off the table. And O. Yeah, because that's the other thing that people need to understand about these things. They take a long time. I mean if you think about I invested in Simple Mills as an angel, I invested in 2016. She had already been started for three years before that. So she was in it since 2013. They just sold this year, 2025. So I was in it nine years. She's been in it 12 years. All along the way there's opportunities for liquidity in there because people generally have anybody that's investing out of a fund has a five to seven year time horizon that they're trying to invest. So there are, there's opportunities for liquidity along the way.
- [40:02]
B
Totally. So you investing in well, what's at. At mandatory in your mandate? What's, what's typically your fund cycle? Is it, is it seven years?
- [40:12]
A
Yeah, I mean it's a ten year fund and we generally look at each new investment as being will our whole period be four to seven years depending on, you know, what happens with the company.
- [40:23]
B
Got it. And so the, the round size 2040 million, 2240 million dollars into a company, what Typically is the revenue threshold. What typically is the revenue of that company when you all. Because again I know you're not, you're not looking at the early stages certainly with those amounts. What, what typical revenue ranges are you looking at for your.
- [40:48]
A
Yeah, we, we don't want to be overly prescriptive with our revenue size. So if something's just killing it and really, really doing well with great velocities guys, great unit economics, we might look at something even smaller but generally companies are going to be at least 20 million of revenue and probably on the upper end for growth oriented deals would be up to maybe 100 million where we can, so we can still get a large enough ownership percentage. If it's a buyout deal we'll, we could go even higher than that. And we do some buyout deals generally in things like co manufacturing. So we have a co manufacturing company called Tandem Foods that, that makes bars for all the natural industry. The people like Clif Bar, I mean Kaimbar and RX Bar and Perfect Bar etc but generally it's kind of in that 20 to 80 to 100 million range.
- [41:45]
B
Got it. And when I know that there's again no one right answer to this but in your mind, I know we actually talked about this before in our last conversation, but when should a company be EBITDA positive or start start actually producing profits when it comes to revenue, in your mind, I know that it, that beverage for example, it's, it's, it's a lot different.
- [42:11]
A
Yeah. Beverage is more expensive, takes longer. Yeah, yeah. I think it depends on the category for sure. But I would say that if the company started E Commerce only first, they might get to profitability as early as $20 million, maybe even earlier. But generally I would say it's very possible to be profitable at 20 million if you're E Commerce only if you're going into retail. It's really hard to get the profitability before 50 million to be perfectly honest. I mean there are some categories where people can get 60, 70% gross margins and they can do it, but they're pretty rare most of the time. If you're going into retail stores, I would say you probably need a CRESA 50 million 40 to $50 million threshold to get the profitability. You could be break even earlier but to get any meaningful profit.
- [43:01]
B
And how about beverage feels a little bit high.
- [43:04]
A
I would say it's a little bit higher. Beverage is a little more expensive overall just because of the promotion involved and whatnot. So maybe, you know, maybe it's 60, 70 million. And you know, Frozen's in that same boat. I think Frozen, you probably need to be up that high too just because, because it's hard. It's harder.
- [43:22]
B
Let's, let's say you're 50, 50 million and you're in retail or 50, 60 million, you're not yet profitable. What are good reasons in terms of why you might not be profitable and maybe bad reasons why you might not be profitable?
- [43:38]
A
Well, certainly unit economics matters a lot to us. So your gross margin, your contribution margin are really important. If you can't price your product to make at least a 40% margin, that's structurally difficult, that's going to, that's going to extend when you can get the profitability. And it really questions whether your product is really that defensible. Because if you can't price in that 40% then you know, maybe you, you don't have a much of a moat as a product. So that's certainly a factor. Then it's, then it comes down to G and A spending too. You know, people sometimes you get three or four founders and they're all taking out too much money. That can be a factor. You might have beautiful offices and things that just, you know, a scrappy CPG trying to grow wouldn't do.
- [44:28]
B
How, how do you think about category creation and what is like a new category in your mind versus versus maybe just a very innovative product. Because what, what if for example, someone like a founder comes to you and says, hey Tyler, the reason why I'm not profitable at 50, 60 million is because we are building this new category. We spend so much on marketing, just educating people about this category. Right. So that's the reason why we're not there because we have to spend a lot more marketing spend than other categories. What do you think about, you know, what is true category creation in your mind when it comes to, in, in food and beverage versus maybe a trade up where it's a, it's an improvement to the product, but it's a product that people still know those are hard.
- [45:09]
A
Investments and I really admire the people that can make them. But it's not us, to be honest with you. We don't really.
- [45:15]
B
To go into new categories.
- [45:16]
A
You mean we don't. Well, we just don't like to take a lot of venture risk. So we tend to companies are either profitable already or really, really close to profitability. And so we looked at Olipop, I think three times and we never got there because they, you know, until their last two years they weren't making money, they were losing a lot of money. And I get it, they were making. Building a category. And kudos to them. They're going to make a lot of money when they sell now. And kudos to everybody that invested in that. But that would not have been us. We could never get over the hurdle. Farmer's Fridge is another example. I mean these are businesses that are structurally changing something in a very, very big way. And so it is more expensive. But you need venture investors for that because that is, you know, concept change that we don't. That's not really our fit.
- [46:07]
B
Yeah. Can we, can we talk about that a little bit more in terms of how venture is different to what you all do at Manetry and. Yeah, yeah, well.
- [46:19]
A
And it's all about concentration. We in our fund too, we had six investments. So very concentrated. But they were all profitable companies. I think all of them. I, I'm hopeful all of them will generate a return and none of them will. We're not going to take a zero on any of them. So it's not venture investing. This is pretty stable growth slash buyout type investing. A venture investor would probably have 25 to 30 investments, maybe more. And if you, if you listen to Marc Andreessen talk about it, he wants to take more. He would like to see a hundred investments in his fund because he knows that the one or two that hit and he doesn't want to miss any of them because the one or two that hit will be a thousand times as money. That's not what we're looking at. We're looking at three times our money would be a great return for us. So it's just a different kind of animal.
- [47:09]
B
No, that makes sense. I mean it still feels like within cpg, it seems I, what it's, what it appears like is I don't think that maybe if you are in cpg, you might be in the earlier stages even you might not be looking at companies on the, what venture might mean on the tech side. I think still means a little bit maybe differently on the CBG side. Where. Because. But maybe I'm wrong. I don't know.
- [47:38]
A
No, it's true. But there's still similar elements to it. So I think that's why 25 to 30 versus maybe 50 on the tech side, different investments. Because you know, a very good early stage investor is Nate Cooper at Barrel and he, he's outstanding and he invested in Olipop. He invested in nowadays and I, I've invested in that. That's one of those THC Beverages. But I know as an angel investor in that, that's a very binary investment. That's going to be a great return, you know, similar to like my simple Mills return. Or it's going to be a zero.
- [48:12]
B
Right?
- [48:13]
A
That right. In our world we can't take zeros. We, you know, we're focused on later stage investing and those, those don't. We're trying not to get zeros. But in, in an earlier stage investment you need to take. Make 30 bets so that you get some that are 10 times your money and some zeros.
- [48:30]
B
It makes, that makes a lot of sense. That makes a lot of sense. What categories in food and beverage do you, do you feel like are oversaturated today?
- [48:39]
A
Well, I guess the easy answer would be protein. I think we're, I'm a big believer in protein and I believe that we're probably still in the early innings primarily just because if you think about how Gen Z thinks or a great example, just go to a cafe, like go to a cafeteria line and stand behind a bunch of young people that are 25 or 30 or 25 to 27 years old. They'll all be talking about macros and protein and the fact that they're talking about that so much and they care about it so much. My daughters are talking about it all the time. I know that we're probably still in early innings on protein. What I don't really agree with is there's a bunch of categories where we're putting protein that don't really make a lot of sense to me, such as water and popcorn and things like that. Maybe they'll pan out, but it feels like a bridge too far to me. So that's why I would say maybe that's a little bit oversaturated as related to the categories that people are trying to put it into.
- [49:36]
B
Are there, are there categories that have emerged within protein that maybe weren't there before that you actually think actually could be interesting or is everything, everything that's kind of new on the new protein side, is that just all. All doesn't kind of make sense to you?
- [49:53]
A
Uh, no, no, there are definitely some that make sense. I think, you know, I think that the smooth, the, the drinks where they've core power is a good example. Koya, where they've kind of upped the protein to 30 grams, 40 grams. Those kind of make sense because one of the things like as a plant based eater, I'm trying to get to a hundred grams a day in protein. That's hard. That's A lot of protein. It's really hard and if somebody can help me jumpstart it with something and get 30 grams, that's a big plus, big win. So I think there are some things like that. Am I going to eat crackers that have protein? Probably not. I mean that's probably not going to be where I go to get extra. You know, I saw somebody put protein in seasoning. Okay, I can add one or one or two grams of protein by pouring it on my food. I don't think that's going to make a difference. I don't think I'm going to do that. So I think the sum are just too far gone.
- [50:52]
B
I know it's not plant based, but do you think protein ice cream is interesting?
- [50:55]
A
Yeah, yeah, for sure, for sure. I think, you know, if you can supplant it's, if you could create some kind of benefits now. Like what I like about what Alex doing is he's also got probiotic benefit in there. I think that's really interesting. It's very similar to what good culture did. They brought, you know, cottage cheese always had for it was fermented so it always had probiotic benefit. But most of the big players killed it because they didn't want bacteria growing on the shelf. And so they go through a kill step. Good culture stopped that didn't do a kill step and they had probiotic benefit and it's taken off and it's growing the industry again as a whole. I think yeah, ice cream could be very interesting to that when they combine that benefit. For sure.
- [51:41]
B
Is there a category that you think is and I guess this way would fall maybe under the mandatory mandate, but maybe more so your, your, your angel investing mandate. But is there a category that you think is totally wide open, blue ocean and unexplored?
- [51:57]
A
Unexplored. Those are hard. That's hard to find. I think. I would say that things that I think are ripe for growth over the next 10 to 15 years. Brain health is a big one. I think products that can add in certain mushrooms. L theanine, DHA omega 3s. That's really interesting to us. Fiber is another category that's getting a lot of play. Belly Welly and Super Gut are great examples there. They're both growing very fast, trying to create clean metamucil alternatives. And for people that aren't plant based, that's a real benefit because fiber is hard to come by if you're not plant based. I get plenty of fiber being plant based, but that's a really Good place to play, I think. So those are a couple that we like. But you know, we're also now broadening our mandate. So we used to be food and beverage, now we're all of wellness. So we'll look at fitness, we'll look at clean beauty, healthy home, VMs, a lot of different categories. And so we're starting to. We map out all those categories and look at ones that we think are most interesting.
- [53:00]
B
That's helpful. That's helpful. What, what's the biggest thing that you feel like you've changed your mind about in the past year?
- [53:07]
A
Oh, wow, that's an interesting question. You know that comment I made about nowadays, I think if you would have asked me a year ago, I would never invest in alcohol or cannabis brand. And what really changed with this nowadays? Because I'm actually sober myself. I've been sober for like eight years and I just don't really like the societal effects of alcohol and all the abuse and domestic violence and things like that. And. But what these guys have done is they've taken it very low dose THC and so it's not. They don't. And I've tried them actually and they don't get you high and they don't get you drunk. It's like a muscle relaxer really, but yet it's a social beverage. And I really, you know, I know they've been kind of banned in this reopening and I think that's really just so they can get regulation around it. But I think that if that replaced a whole lot of alcohol in this world, I think we'd be in a better place overall. And so that's something I've really changed my mind about for sure.
- [54:10]
B
Yeah, totally, totally. I had one of the founders of, of Canon on, on the show and they were, and they were talking about how beverage. I think it was 10 times like when you would go into a, if you were able to, if, if you went into, bought like a THC beverage product maybe 15, 20 years ago, it would be probably 10 times the time in terms of dosage of.
- [54:37]
A
Yeah, it was, I think it's a hundred. It was a hundred milligrams versus five.
- [54:41]
B
Yeah. Versus five now. And it's crazy.
- [54:45]
A
Would you be able to talk to people with that much? It's crazy.
- [54:47]
B
It's exactly. And, but, but it was what I thought and I think nowadays as well, among other brands is if you think about like alcohol, how much, how we consume alcohol, it's obviously the, the dosage isn't that much Per, you know, wine. A glass of wine for. You could have. Yeah. Yes. You could have more throughout the evening. And I thought that was like, that was a really interesting insight. I thought too just that you could have multiple of them. And I mean, I, I, I have can and I agree with you. It actually just makes me relaxed.
- [55:20]
A
Yeah.
- [55:21]
B
And yeah, I, I, I actually, it's.
- [55:24]
A
Not going to ramp up your violence and, and all the other negative effects that happen now. You still can't drive. I wouldn't advise any. You shouldn't be able to drive. There should be regulators just like alcohol. But yeah, it's, I, I think it'll be societally better.
- [55:40]
B
I, I completely, I completely agree. I completely agree. Is there an investment that taught you the most.
- [55:46]
A
That's a really, that's an interesting question. The. I did a series, I don't know if you read it on LinkedIn, about all my mistakes and like six of, I think I did six of the mistakes that I've made in the past. I've probably made a lot more mistakes that, but I've been doing this for over 30 years, so I've had plenty of time to make mistakes. But I would say that the one mistake that I see founders make most often, and I've made it a couple times, is going wide too early. So it's so alluring. You're a $2 million brand and Kroger comes calling and they say they want to put you in a thousand stores nationwide. You're like, oh, my God, you're so, I mean, first of all, it strokes your ego. You're like, oh, my God, that's unbelievable. They want me. I gotta go in there then. And it's such a huge mistake because unless you have 5 million plus on the balance sheet that you can use for marketing those pro, that product's never gonna turn. Nobody knows who you are, you're a tiny little brand, and then you're gonna get kicked out in a year or two because you don't turn. So it's such a huge mistake. It's so hard to avoid because it strokes your ego and all the reasons why. And it's going to show huge revenue growth and there's so many reasons why you want to do it, but it's such a bad move mistake. And I made it many times, so I, you know, I can't. It's tough.
- [57:06]
B
Do you, do you encounter conversations with, with founders where they say, hey, wait, the reason why we want you to invest or, or, or we're looking for investors is because we have this opportunity with Grover, we have this opportunity with Costco to go in and, and, and to do it. And I'm sure, I mean, it's very, very impressive. It's really hard to get these. There's only a limited amount of shelf space. It's really hard to kind of get retailers interested in your product, period. When do you know it's too early when you have these conversations with founders, even though they're, they are getting this traction?
- [57:38]
A
Well, we probably wouldn't be looking at the company's words too early because it's not a fit for us because they're probably, they're probably 5 million or less. You know, if you're $10 million in revenue, you can definitely take on a Kroger. Now you need to make sure you raise capital so that you can do the marketing to go along with that or you're going to again lose. You get kicked out. You don't want to do that. But it's really, for those smaller brands that are under 5 million of revenue, that are thinking about it, that where it's a real struggle.
- [58:08]
B
So that's, that's in terms of revenue threshold, that's in, in your mind, if you're, if you're kind of below, below 5 million, that's when, that's when you make.
- [58:18]
A
It's a definite no. If you're between 5 and 10, you gotta really think apart about it. But if you're above 10, you should be able to do it. But you gotta make sure you have the marketing dollars to support it.
- [58:27]
B
It's helpful. What piece of advice would you give to the younger generation who is trying to break into food and beverage private equity?
- [58:36]
A
Oh, boy. It's not easy. There's not a lot of us and they. The number has dwindled over the last kind of five years, since about 2019, I think it started to come back a little bit. But I think what I would probably do is really get knowledgeable on the industry, read a lot, read about every one of the emerging companies, start posting on LinkedIn. You could post articles and talk about the article, or you can just start posting insights and really build an expertise so that people see that you are an expert and see you as an expert. Starting a podcast is a great example too. Then you get to interview a whole lot of people that are really smart and learn from them as well as position yourself as an expert. And I think that's, that's a good path as well. But basically what you want to do is you want People to look at you as someone that really knows the industry well and that's a way to get a foot in the door.
- [59:33]
B
I think it's a great piece of advice. I agree. Whenever I, whenever I encounter people I that want to break in, usually my answer is release content in some form or fashion. Whatever you're kind of comfortable with, whether it's, whether it's videos, whether it's text, whatever it is, just start, start kind of. Because also I find with releasing content, you then understand your thoughts a lot better and you're a lot able to. And you're, you need your, a lot of people to kind of think through what you're, what you're trying to say. And so when you do maybe have that meeting and you, and you do talk to someone like you, Tyler, an exceptional private equity investor, then you actually, you really kind of thought it through in terms of your, your opinions, your, Your ideas.
- [60:14]
A
Yeah. No, you said it much more eloquently than I did. That's exactly right. Content. Yeah.
- [60:19]
B
Never. No, no, no, no, no.
- [60:20]
A
You're.
- [60:22]
B
That is, that is not true. But my final question for you. Yeah. What's. What's one book that's inspired you personally and one book that's inspired you professionally?
- [60:32]
A
So I knew you were going to ask this, so I, so I went and looked. A book that I read personally that I think is really, really good and that everybody should read is called the Heat Will Kill you First by Jeff Goodall. He's, I think he's a Wall Street Journal reporter that wrote a book. He first wrote one called the Water Will Come, which is all about rising sea levels and how it was going to affect seven cities around the world. This one's just about the effect of heat as the world gets hotter on people. And it's a really good book. And then the second book professionally, it's called Generation we the Power and Promise of Generation Z by Anne Marie Hayek. H A Y E K I first read this book to understand my daughters were both Gen Z. And when I read it, I basically, it was so mind blowing just how differently Gen Z thinks that. I thought, wow, every business leader should read this book so they can understand the people that work for them, the people that they're selling to. It's a really, really good book.
- [61:32]
B
Tyler, thank you so much for telling me about these two books because you are so original.
- [61:38]
A
These.
- [61:38]
B
No one has mentioned either of these books, so really, really excited. Add them to our list. And this is. Yeah, no, that's, that's what do you think is the most suggested book on this show?
- [61:54]
A
Maybe Shoe Dog Film.
- [61:57]
B
Right?
- [61:58]
A
It's a good book, too. I mean, that's a great book, for sure. Yeah, I would guess.
- [62:03]
B
No, no, it's awesome. Thanks so much. This is, this is a fun, fun read, too.
- [62:07]
A
Yeah.
- [62:08]
B
Yeah, for sure. Tyler, thank you so much for coming on the show.
- [62:11]
A
This was great, Mike. I really enjoyed it, for sure.
- [62:14]
B
Thank you so much for listening. I hope this was helpful. I hope you loved it. And if you do love it, then you'll subscribe@theconsumervc.com to the newsletter. Thanks for listening.