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- [00:00]
Russell
The company went from 1 to 5 to 10 to 20 in six months. We're now a nine figure brand. Profitable. And it was so hard. People love telling stories about growth, but no one talks about operationalizing scale.
- [00:12]
Sean
From what I've read, from what I've seen, you're like built in a lab to be good at running businesses. I would love to unpack that.
- [00:18]
Mike Beckham
Dog food falls in that category of things that I can get caught flat footed with it. And that's why being on a subscribe and save from E Comm makes a lot of Sense.
- [00:26]
Russell
We're now three years in. We've got 100 people in that facility. It's been transformative from a P and l perspective. Adding 30 plus points of contribution margin, fully loaded.
- [00:35]
Sean
We had a very office. I didn't wear shoes. We had all the secondhand furniture. Me and Connor were 23 years old. He's like, look, it's just never gonna get there. He probably took like four years after that, but as soon as it happened I called him up like gotcha mother. We did it.
- [00:47]
Mike Beckham
My confidence in the early years was really high and as I look back, I had no reason to be that confident. But I had to be or we would have never got where we got.
- [00:56]
Sean
Ridge never went through this hyper growth period. We're an older business than both her guys businesses and I'm a lot younger than you guys. Ruj is gonna be 14 years old and every year it's just 50% growth that stacks up to be a really big business. But it's taken us a long time to get there.
- [01:10]
Russell
Our CAC is lower now at $5 million of spend than it was at a million dollars of spend per month. The reason for that is conversion rate wins, audience targeting, team technology and creative.
- [01:23]
Mike Beckham
Welcome to the operators podcast. My name is Mike Beckham and we are proudly brought to you by Fulfill After Sell Rich Panel, northbeam, Sarah's analytics and Postscript. We are a community for entrepreneurs that are building things and if you want to be a part of this community, you can listen to the podcast. But you can also go sign up for our newsletter. A ton of awesome information in there. We also partner with E Commerce Fuel, a forum for you to connect with other entrepreneurs that are building businesses where we can learn from one another. So without further ado, onto the pod.
- [02:02]
Fulfill Representative
Dealing with big box retailers means EDI connections and that's often a trigger for needing an ERP system. We've been using EDI connections to Costco forever and the only way that we've really solved that problem. To make it seamless is through Fulfill. EDI adds complexity to everything you do and Fulfill solves that complexity with their connections to their systems. You need Fulfill to move from being just a D2C brand to being a true multi channel brand because big box retailers are going to require you to connect to their systems using edi. Let me tell you, it's way easier if you do it with Fulfill.
- [02:34]
Sean
Yeah. So Russell, I think there's, there's two ways we want to take this episode today. So one, we want to hear about you and your background because you know, from what I've read, from what I've seen, you're like, you know, built in a lab to be good at running businesses. So I would love to unpack that. But let's, let's start with actually just pet as a category. You know we're doing this podcast and over the past five years, six years really since COVID pet has been consistently the hottest category. You know there was a big push into fitness and fitness had a total lull from like 23 to probably 25. Fitness is back now and like fitness companies are doing good, but they went through the trenches. Outdoor had an amazing 2020 and 2021. I know outdoor brands that are still 50% below their 2021 revenue. Right. So like it came in waves but pet was consistent there that like grows every single year. I know of a lot of friends who made a lot of money selling their pet companies right there seems like there's strategic buyers in the category. So why, why is pet such a bright spot? You talked about, you know it's fast growing but maybe unpack what you've seen. You, you were pre Covid. What was that experience like the packs six, seven years building this business and what were some of the tailwinds you experienced?
- [03:52]
Russell
So a great question. So we started as a fresh frozen business. The OG I give credit to my wife and my mother in law, they were cooking fresh human grade meals for our mini golden doodle Jack. This is going back ten odd years. And so the story is studio apartment New York City, cliche but true and mission driven. People belief that health and wellness is a right, not a luxury. It turned into this thing, this business over time. Um, you know the original recipes, it was like a lean cuisine for dogs, you know, fresh ground turkey, ground lamb, vegetables, fruits et cetera, balanced with vet nutritional advisors, frozen, shipped to direct to consumer. We still have those that, that product in our portfolio. For, for us the feedback was and I'll kind of with greater granny. Larry, address your question. The feedback from our customer base was we love fresh, but it's really expensive. And where do I put it? Like if you're an urban city center with a German shepherd, like, you're like, your freezer is small. Okay, I live in the suburbs, but it's, you know, 80% smaller than a suburban freezer. So you're choosing whether to keep your meal frozen or the dog. And so it's not convenient, you have to defrost serve. It's messy. Portioning is confusing, et cetera. So that led to what's called Unkibble. We launched Unkibble in April of 2020 and the mantra is the convenience of a fresh food diet and the convenience of Kibble. So it's shelf stable. Take all the original fresh ingredient inputs, human grade, human grade suppliers, number of our suppliers, you know, work with whole foods, restaurants, et cetera. We take the water out. The technology is freeze dry. There's a fresh dry process we use which is trade secret. We take the water out of the ingredients, which makes it shelf stable. When it's shelf stable, no cold chain, no dry ice, no insulation. So we removed this huge cost layer from the business and pass those savings along to the consumer. So when Kibble was 30 to 40% less expensive than any of the fresh frozen brands you may have heard heard in the marketplace, we launched that in April of 2020. Okay. So right as Covid took hold, we were a five person team, fully remote. We all had Covid. So we were all laughing because we couldn't smell and we're like googling. It's like, is that a symptom of COVID Who knows? Let's launch Unkibble. We are a fresh frozen business at the time and so, you know, we had very little cash on the balance sheet. It was, it was honestly a full send moment. I always share the story, my co founder and I, this guy named Dylan Monroe who's been with the business since the beginning. We debated the first purchase order and you know, well, let's, let's. It should be a $70,000 purchase order which will last three months, or an $80,000 purchase order which will last four months. We debated this because those are material dollars for any company even now. But at that stage in particular, it's kind of like chips.
- [06:49]
Mike Beckham
It's like an all in moment. Yeah, for sure.
- [06:52]
Russell
And we, we launched, we sold out in three days. And that, and that has been our story. We then followed up with a purchase order for half a million dollars. With a co manufacturer we didn't have half a million dollars. I mean we didn't know where to get it. We had ideas but we, and that has been so. So that launch was concurrent to spike in pet ownership and then a lot of these consumer behaviors where people are at home. I mean look at the hybrid working model. Now people aren't going to the office five days a week. Wall street is. But most like CPG brands or other industries, there's a balance between home and work. And so E commerce purchase behavior had to change out of necessity. The work life balance changed. That was a reality. Pet population spiked. And then I think over that there's been this general layer of health and wellness as we discussed. And we were, we were, we've been in the epicenter of those thematics with this DDC Health and Wellness brand and the company from April 2020. Over the next six months when we were honestly we were doing probably a million dollars of rev run at that stage. The company went from 1 to 5 to 10 to 20 in six months. We're now a nine figure brand profitable. But that was amazing and unbelievable. People love telling stories about growth. Like that's a, that's a headline.
- [08:14]
Mike Beckham
That's insane. That's insane.
- [08:17]
Russell
But no one talks about operationalizing scale and it is. And I would love to pick your brain too because you guys have been in the trenches, still are. It was so hard. Customer service tickets, you know, day 05, you know, day 30 500. Who's responding to the customer? I mean I was trying to. Is it, is it you? I mean we're looking on the room. There was only five of us. So it was this story and I can get into some of the details now. I'm getting long winded. But how do you, how do you keep up with that demand curve? Because in Covid you either you either lost on the demand or supply side of the equation. We had demand and supply was brutal. Right. And so that, that's been our journey of, of how to build a business around that demand signal over the past, you know, five years since launch.
- [09:06]
Mike Beckham
It's tough too when it's a food man. I mean quality control obviously is the thing that gets so difficult when operations have to scale. And I think when you're adding in the food element and a perishable element, that just takes it to a whole nother level, you know.
- [09:24]
Sean
The hack though is that the dog can't tell you it tastes different.
- [09:27]
Mike Beckham
That's right.
- [09:30]
Sean
Yeah.
- [09:30]
Mike Beckham
So dog can't say it tastes bad.
- [09:33]
Russell
Yeah. As long as dog looks adoringly into mom or dad and consumes bull like check order again. But I would say there's the picky pet population exists smaller breeds like having a picky and, and we get testimonials of people saying like in tears. Oh my God, thank you so much. I've tried four or five different brands. I've gone to the vet. Either my dog had an allergy, we've done ingredient elimination to kind of pinpoint and diagnose causation, or my dog just won't eat. We, we found Spot and Tango because again, it's just like wonderful aroma, like amazing ingredients and like no surprise the dog likes it. But it. For folks that have dogs that are picky eaters, it's a challenge. Like, you know, think about it. If you like go to the office, your dog didn't eat breakfast, it's like, oh my, what's the dog going to eat later? I hope the dog eats and the dog is eating his survival. So there is this like very fundamental emotion that we're pulling out of consumers just given product market fit. But to your point, Mike. Yeah, it was, it was hard. We got to catch up with the rest of the story. We scaled at our peak to six co manufacturers across the country over from, from when we launched the next 24 months. We had factories, only the US not overseas. We had 18 Wheeler trucks going from California to Indiana, from Ohio to Texas. Like it was like a three dimensional sudoku puzzle in real time. And it just kept getting bigger. You know, trucks are breaking down. Where is it going? Left, right. And we had a very small team. And so it was this puzzle. So was the puzzle. But we, we eventually said to ourselves like we have to control the supply chain. And we decided to insource and build our dedicated factory weaned off third party. And I can share some more details about that. But that's been a game change for our very contrarian because building a factory is expensive and it's hard. Like it was eating glass break, bathroom trailer break trailer, office trailer, hard hats, steel tail boots. You know, I'd be on a phone talking to like a tick tock influencer and like our team in New York. And then a guy's like, hey Brewer, get over here. Where do we put this freeze dryer? I'm like, oh my God, put it in the corner. Like, oh, it weighs 30,000 pounds. Like we need both corners. Like okay. So it was lots of vertical learning, I would say.
- [11:57]
Sean
Yeah. So going back to those early days, you Know you're doing a million dollars a year. You, you launch this new product. Covid, Covid Spike. You get to $20 million in six months. You, you had one line where you said you needed $500,000 and you didn't know how to get it. How did you fuel that growth?
- [12:14]
Russell
We stay. Well, we, we like staged the purchase orders and, and honestly the, the supply was not overnight. Our, our only supplier at that stage, like we, two weeks after we had received the first purchase order and we stocked out and we sent them an email with this new volume they called they. I mean they literally wrote back and like, well that's just not. I'm not sure what you're ordering, but there's no way you need more of this stuff because they were kind of legacy, kind of brick and mortar player and didn't fully appreciate what's possible like velocity online. And so the answer was in reply like, well we can't do that fast enough. And so because they were unable to operationalize that level of growth, it was a drip feed. So they, it was a staged po so they would ship us product indicators is kind of once every two to three weeks and we would just run through it by which by the way is that's not, that's not good for retention. Right. So again back to the original thesis. If a dog runs out of food, that's the worst case scenario because a dog has to eat and then transition if they have to buy new food. That's. That creates friction in the life cycle for a customer. And so we had to really govern how quickly we. To ensure that we're meeting the demand of our existing cohorts and our subscribers and we're all growth guys. So we're sitting there going like oh my gosh. And I know you guys remember this, you know, Meta CPNs. I know your ROAS was killing CAC was low. You know, for those businesses that had like a treasure chest of cash supply, there were very few and a supply chain and high product market fit are probably, you know, well exited from their respective businesses because they would have absolutely made a mint. We had no cash, no supply chain, high product market fit and low cac. So there was like this giant button that was like hyper growth. You know, they use like the Star wars analogy. It's like you want to go into hyperspeed. It was like flashing and we're all sitting there like tempted to press the button, but without inventory and knowing that if we press the button we would just stock out. It was not. We, we had to really be patient and that's paid off in the long term. But again, this was not, this story is not overnight. O, this is not like, oh yeah, great, you've, you've solved it all in, you know, a few weeks. So it was, it was patience and staged delivery which enabled us to actually afford those early purchase orders.
- [14:58]
Sean
Yeah, you know, Russell and I'm sure every, like, as soon as Covid, you know, subsided slightly by, you know, Q2, Q3 of 2020, I'm sure everyone and their mother was trying to shove money into this business. Pet was such a hot category. You had this huge growth. So did you, did you guys take investment? Did you think about taking investment or what was that debate? Like?
- [15:20]
Russell
We did. We partnered with our equity partners and they actually were incredible operators in helping us breathe life and bring our Allentown factory to reality. That's what they do. Not only the investors, they're like hefty operational expertise. But yes, out of necessity, we could not keep up with demand. Again, I think I talk about this with other entrepreneurs. Everyone asks this question of should you raise capital? What is ownership? Is it better to own 80% of a $5 million business or 10% of a $500 million business? Like you do the math. But there's trade offs for sure. And neither path is. There's no right answer. It's all up to the individual or the management team in terms of how they want to build the business and what the long term either opportunity is or their financial needs or spiritual beliefs or personal beliefs or otherwise. Because there's trade offs right for us, given the stage of company. And the signal of the decision was we collectively have energy and enthusiasm to growing and to do so, we have to enable that growth with not only a factory, but capex. And capex equals cash. So yes, we went through that process.
- [16:44]
Sean
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- [17:28]
Mike Beckham
that makes. I think that's worth emphasizing that you sold a part of the company but that you had a really clear use in mind of the capital and that there were expertise that came with that capital. I think it seems like to me when I talk to companies that sell a piece of themselves and then regret it, it's because there's not a clear heuristic about why other than like, hey, we've got a big valuation and so we should take some of this money. And so it kind of seems like to me that there's kind of three paths and one is that you just continue to bootstrap it and you say, hey, we're going to, we're going to grow as fast as like the business allows us to and as we can pull out money and reinvest, there's the. When we get to a certain level of scale where people want to invest in this, we're going to take money because it helps us to unlock capabilities or to do things that we just would be literally unable to. Like you said, building vertical integration was going to be probably impossible due to the capital and the expertise that you would need to do it. And then there's the just like, hey, I'm, I want to get off the merry go round, I think I'm going to throw up, you know, kind of exit route. But it makes a ton of sense what you guys did. I'm curious, as you look back on that period, Russell, because I've now been through, I don't know, maybe three of those, like hyperscaling periods. What are the emotions and reflections that you take from that period? What did you learn from that period? How do you feel about that period when you think back about those, those years of your life?
- [19:00]
Russell
Such an insightful question. The earl I refer to the early days, like the early, early days is like the dark times. I mean my wife and I actually started this thing out of our apartment. She now works in finance and she's not directly involved in the business. But you know, my, I have three young kids. They were helping me. Our distribution center was like the basement of our, our house when we moved the suburbs. And so it was very much like a bootstrapped homegrown story. And even my co founder, I talked about that quite often actually. Even in kind of like year, you know, 0, 1, 2, 3, those were the science experiment days. Of like can you actually get product market fit and escape velocity. All these fancy words that we use in hindsight. And I didn't know it at the time, nor did I have the emotion. With a fair wind, the business could have blown over. Okay, as in a few missteps to the left or to right and you're off the tracks. And there wasn't enough capital to rehabilitate so you had to be very careful of decision making. Right. It's like that, what's that Netflix show where they're walking across the bridge and there's like the glass panels and if you step on the wrong glass panel, right, you fall to, to your, to your death or in the game show, you're, you're eliminated. You have to be very careful and walk the bridge. I didn't think that those thoughts were not of present mind when I was in the moment, but in hindsight looking back of like when we built the factory, we were a much earlier stage business that was bold. It was a big bet. It was like, okay, this is like, this is a smart decision. You know, it took us a year. We've been, we've actually been in operation now three years. We've scaled, we've automated the facility but at the time like risk was on for sure. Finding location, hiring a team, installing infrastructure, the cap, xp. So if I, if I knew then what I know now, I probably would have been more, the emotion would have been more probably higher. Anxiety or stress, et cetera. And I would say we've as a, as a team, we've always had like blinders on. We are like, we are very head down folks. We like to build and we're very involved in the company. I go to Allentown every week. You know, I always joke like New York City is like the kind of headquarters office, but in Allentown it's steel toe boots and jeans and like that's an amazing team. But they are the enabling factor of our, of our business. And then I would say the other emotion is there's always, you guys know this. There's always a lot of uncertainty and ambiguity. I think I talk to our team about that a lot. A lot of people don't like ambiguity and role or direction. And as a business you can, there's like strategic direction. There's like the tactical have to do these three things today. But ambiguity is like roles do change also. You know, in the early days we used to hire kind of all around athletes. Now we have functional expertise. You know, someone may be a supply chain expert or Netsuite administrator. Sometimes those roles change too as the company grows and the needs change. And a lot of folks, ambiguity is an emotion that I, that I've also experienced. And you guys know this is my role used to be, I used, I used to cook, I used to be the head chef, you know, like weekends and accountant. So as my role is shifted, there's moments and I'm like, wait, okay, where should I be focusing my time? You know, so it's interesting there, there's kind of different stages and different feelings as, as these companies do grow.
- [22:28]
Mike Beckham
So to share a story from my life, we recently had our 10 year anniversary as a company and fairly similar story. You know, I was all the initial money in, I had two co founders, hypergrowth. You know, like we went through many of the pain points that you did. But I've, I've made the observation before that to be an entrepreneur you have to be optimistic, really to the point of almost being intentionally naive. That it's like, you know, it's like the kind of Harrison Ford in Star wars, never tell me the odds thing. It's like if you really think about the odds too much, then you just would never do it because you'd realize that the deck is stacked against your success. But so I just always believed we were going to win. I always believed it was going to be successful. And, and, and that helped me, it helped me to launch the product, it helped me to scale the product, helped me to recruit people that I probably had no business being able to recruit. So anyway, we're at this dinner, this 10 year dinner, and I think it was one of the first times that it really hit me we were doing toasts. And my toast was something to the effect of I now realize the amount of risk and the improbability of this working the way that it did in a way that I didn't at the time. And, and what came with that is I said, guys, I really appreciate the belief that you had in me and the company when really we didn't deserve to have that level of belief or faith that you know, this would work out. Because in my mind it was like, I didn't even feel like people were really being that flexible or leaning in that much. I'm like, of course this is going to work. But now looking back, I'm like you said, it's like, oh man, it could have easily not work. People could have easily left their jobs and then this thing puttered out after, you know, a year or two. And so it is interesting. I'VE had the exact same emotional reaction that my confidence in the early years was really high. And as I look back, I'm like, I had no reason to be that confident, but I had to be or we would have never gotten where we, where we got.
- [24:34]
Russell
That's it. Sean, what about you? I'm curious your experience.
- [24:40]
Sean
Well, look, I love all the Star wars references. I think both of you guys made one independently, so that's pretty cool.
- [24:47]
Mike Beckham
Do you know what Star wars is, Sean?
- [24:49]
Sean
Yeah, yeah, yeah. No, they've made recent movies, guys.
- [24:53]
Mike Beckham
They've made recent bad movies. Yes, that's right.
- [24:56]
Sean
You know, Ridge, Ridge never went through this hyper growth period. Right. We're actually, we're an older business than both her guys businesses and I'm a lot younger than you guys. Right. So you know, Ridge is going to be 14 years old this year year. And you know, and every year it's just 50% growth. So that stacks up to be a really big business. But it's taken us a long time to get there and we, we always like no one thought it could be this big. And I always tell the story. Connor hates it. But like, so I didn't start Ridge Rich was a client of my ad agency doing $5 million a year. And we decided to merge their. Their business came into the ad agency. I sold off their. All the other clients as a book of business. I'm like, we're just going to do this. And I remember Connor being like, ridge would not do it. He's no way Rich will ever do $100 million a year. He's like, it's impossible.
- [25:43]
Mike Beckham
He said that?
- [25:43]
Sean
Yeah.
- [25:44]
Mike Beckham
I don't think I've heard you heard this quote. Wow, that's.
- [25:46]
Sean
Yeah, yeah. We're sitting in, we had a very office. I didn't wear shoes. We had all the secondhand furniture. And he's like, we, me and Connor were 23 years old. He's like, look, it's just never going to get there. He's like, there's not that many wallets to sell. He's like, you know, this isn't the right team to get this business to go to 100 million. And it probably took like four years after that. But as soon as it happened, I called him up. I'm like, gotcha, mother. Like, we did it
- [26:12]
Mike Beckham
similar. I had a similar conversation with our cfo. I remember very vividly we were sitting there looking at a profitability model and this is like 2018 or 2019. And he was just like, listen, I've looked at the numbers. A lot of ways I don't know how this business ever makes much money. And probably since that point, we've probably made about $120 million in EBITDA. But it's like that's the push and pull. Maybe that's the push and pull. What makes you and Connor great and me and my CFO a great pairing is that you gotta have like the pessimist kind of realist and the, and the blind, almost like the optimistic, ambitious, you know, person driving and that, that partnership makes it work for sure.
- [26:55]
Russell
CFOs keep you grounded, right?
- [26:57]
Sean
Yeah. And you know, a good CFO will only tell you what's on the field. Right? Like CFO is not going to put in their model. Like. Yeah. And actually maybe there's a magic fairy that comes, gives us $50 million in the future like that, that just could
- [27:11]
Mike Beckham
have, Connor could have never seen rings or power banks, for example. You know, like, I think one of you guys stories is just like the amazing success you have had into jumping into categories that are not even obvious that they would be really great categories for you. And you guys have done that amazingly well and you've grown the TM of your business in a way that's very unexpected, I would say.
- [27:35]
Sean
Oh yeah, in a great way. And Connor was right. The wallet business is very much a hundred million dollar a year business. Right. But he didn't, he didn't think that like, yeah, I'm gonna make you sell every possible thing, maybe even dog food.
- [27:50]
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- [28:34]
Sean
I want to go back to, you know, your guys's rapid growth over the pandemic and I brought up this in the beginning of the podcast that like pet Seems to be a category that has not had a down year. Um, now there's been some hard spots, right? Like I think petsmart's a publicly traded company worth like less than you. I think they're worth like maybe $500 million, right? And then there's, you know, the, the chewy, chewy ipo which is like kind of rebounded. But it seems as a category overall, PET continues to have, you know, strong double digit growth. There is dot com adoption. The CACs seem to work. There's lots of acquisitions, there's strategics. Is this just me projecting on you guys that it's all awesome and roses or was there a difficult period over the past six years where you're like, hey, you know, building a factory is hard, we're going to talk about that. But like really from like a revenue generation, from a sales channel generation. Like did you guys see any of those challenges industry wide or has it
- [29:32]
Mike Beckham
just been smooth sailing?
- [29:34]
Russell
No, this journey is never linear. You know, it took us 18 months to get to the million dollars of Rev Run. You know, in, in the old days, I think the website I, I built on Squarespace with like template photos. We offered like small plans, you know, then we put it on a headless Shopify store. We built a personalization funnel that reduced CAC by 50%. So for the first 18 months it was like built. It wasn't like turn the lights on, everyone's buying our product parton subscription. It was like, okay, foundation of the tech and website UX UI experience. You know, how to figure out customer acquisition costs. And then some of these are success criteria. Along the way has been like how we use data to inform decision, like LTV to cac, LTV contribution margin to cac. And like really thinking about the math of how to scale this business, I think a lot of companies do figure out paid performance marketing. Like okay, great, we can grow like yay, here's a revenue figure. And you can sell that if you're raising money or otherwise. But they don't really understand how to build the EBITDA and the profitability piece. That that kind of comes never in some cases, which is, I've always, that's like my greatest paranoia that I wake up one day after whatever, 12, 15 years doing this and go, oh my God, no one wants, no one's interested in the company because we don't make money.
- [30:52]
Sean
Right?
- [30:52]
Russell
And that that's happened, you've seen that there's a number that's happened to a
- [30:55]
Mike Beckham
lot of companies where it's like, oh, you know, we're gonna pay this back in 24 months. And, and you're building everything off that. And then you get to month 24 on some of these cohorts and it's like, oh, we were wrong. Like, our projections were wrong. The math doesn't, doesn't work. And so like, you know, we've talked to a lot of subscription businesses. I'd love you to actually get kind of granular here about, like, how did you figure this out? Like, did you use the kind of the three ratio? That's, that's pretty, that's being talked about a lot. How did you think about the ratios that you needed to hit to really grow? How did that impact your user acquisition costs? What have you learned through you. You are now several years into it. So you've seen some of these cohorts play out. I think anything you could share here would be really helpful to anybody listening.
- [31:41]
Russell
Yeah, happy to share. So our whole company thinks about this word payback. And yes, there's kind of the three metrics. Ltv, contribution margin and cac customer acquisition cost. So in the really simple terms, if we spend a million dollars on marketing and minus a million bucks, how long does it take to get to zero and then how long does it take to generate a million bucks? Right. And the, the math, we look at the 12 month LTV. So average revenue per customer at 12 months times contribution margin.
- [32:17]
Mike Beckham
Right.
- [32:18]
Russell
So if you're LTV, I'm making this up. If it's a thousand bucks at 12 months and your margin is 50%, your contribution margin LTV is 500 at a year, you divide that by customer acquisition costs and you can look around the curve as far as how quickly you pay back. So how quickly you get to zero. So from minus a million to a zero and then how quickly you double and get to plus a million of peer contribution margin. We teach that to every single function in our company. To new hires on day one. And the reason for that is the marketing team is required to maintain a cap on customer acquisition costs. They can't spend frivolously and breach certain CAC thresholds if it doesn't meet the payback standards of the. In our, our payback's significantly less than one year. They can always spend dollars up to a certain ceiling.
- [33:10]
Mike Beckham
Okay, so let's talk about, just to dive in on specifics. Is it six months, Is it nine months? Where is that comfort point for you where you say, if payback goes beyond this point, I am uncomfortable and I
- [33:23]
Russell
want to Pull back sticks or less.
- [33:25]
Mike Beckham
Okay. And by do you see really dramatic differences in what you can acquire customers for per channel? Or a better way of saying it is do you see very different LTV curves by channel so that you have different acquisition costs by chance? Significantly different acquisition costs per channel or is it general you can paint with the same brush?
- [33:47]
Russell
Yeah. So we, we look at every channel LTV by channel, CAC by channel. We have our own multi touch attribution model. We use post purchase survey as the primary driver. Completion rates are very high by 85% actually complete a PPS survey after checkout which is like shockingly high but. But true. So you get good signal on like mid funnel channels.
- [34:10]
Mike Beckham
Do you incentivize that in any way or is it just the type of customer you have?
- [34:13]
Russell
Okay, all voluntary. So we use that to inform CAC. But yes, we look at all the LTVs and all the CACs and we look at in platform we're not dogmatic about you know, one model or the other. Like ultimately we're using that to inform budget decisions. Right. And yes like CAT goes up, cat goes down. But we've been able to reduce. We actually our CAC is lower now at $5 million of spend than it was at a million dollars of spend per month. And the reason for that is conversion rate wins, audience targeting, team technology and creative. And there's a lot of like super basic stuff. I'll give you a couple of examples. Team who's buying the media? For us, it's all in house. We've had positive and negative experiences hiring agencies, the buyers. The buyers oftentimes will set a campaign or a keyword strategy and like check under the hood two days later. And CAC if cat goes up 5 or 10% for us, that could impact my payback window. So having a team in house that's watching it every hour, I'm not, I wake up and look at the data. It's like, it's like one of our obsessions, right? Yeah. My kids know what customer acquisition cost is. It's like it's, it's the disgusting.
- [35:26]
Mike Beckham
Well it's the closest thing to a crystal ball of what you're going to make in the future. You know like when you're in a subscription business you really can. If you have a good sense of what that ratio is and your marketing's not just all over the place, then the P L actually becomes fairly easy to predict.
- [35:43]
Russell
Right, exactly. And, and audit Creative is a huge one. So having like creative and design systems we like to say that we're in the entertainment business so you know, all of our brands don't compete but we do compete for the consumer's attention. Right. And so if you don't have provocative creative, whether it's Jeff static, video, like whatever the case may be to draw the attention in like we've spent a lot of time thinking about that in terms of what works UGC, etc. Testing that on the website we've seen conversion rate wins. There's been this years long battle. I always encourage brands. Oftentimes folks think CAC's getting high. It only goes up with higher budgets. I can't stabilize or go lower so I'm capped out on spend and I have to diversify growth by going either Omni channel or a new paid performance channel or changing markets international, et cetera. I'm not saying those things are, that's not the right decision. We're doing some and, and actively considering other of the others of those examples. But I always encourage folks like take a step back. I'll give another great example. Last year we pushed up metabudgets as a test like okay, let's see how like where's the breaking point on pay performance in cac? And CAC spiked really high. We learned in like the post mortem, you know, a week odd later that meta was sending most of the ads to age 55 plus with the highest click through rate and the lowest conversion rate. Now that's an, that's an audience targeting issue and you would think after doing this for years that of course that would never happen. Like we, like we know the audience but like something somehow algorithmically started shifting those, those ad sets to the wrong audience. And it only took us asking the question question of where those ads were being delivered which seems so obvious but it was a problem. We actually weaned off that audience and CAC then came way back down. So that's one comment.
- [37:47]
Mike Beckham
And I think at increased spend were you able to do it where you kept spend?
- [37:50]
Russell
Yeah, we hard and Cat Cat came back in line back to the payback that I, that I've alluded to. And the other I think really important point is I always talk, you know the, the marketeers should be home slices with the OPS team like get together because if ops can get you higher margin you can spend more at higher CAC and still hit the same payback. Right. So back to the math. If like if your 500 turns into $600 of contribution margin in that example at 12 months the marketeers can go off and increase budgets at higher incremental CAC by hitting and hitting the same payback windows because there's more so so the ops teams is that guys sourcing cost of goods sold pick and pack three like wherever the wins are along the go get that stuff because it helps. So again and you know think about retention and ltv. LTV is retention aov. Call the customer service team like what are you guys doing to overserve on the experience to boost retention? Retention helps my ltv, higher ltv higher contribution margin that helps CAC so marketers can spend more dollars. So it's kind of the. And again this is not like rocket science. A lot of brands like these words and metrics have existed kind of forever. But I think for us it's really doubling down culturally speaking with how we train and talk about it internally and use that to govern decision making is one of the reasons we've been able to grow at this rate profitably.
- [39:23]
Sean
Sean here to tell you about Saris analytics and Saris Pulse Ridge is profitable every single day and we've taken that super seriously since we built this business. We track contribution margin by day. We look at the SKUs we sell every single day and we have to do this manually up until sarasotx came out. We take all of our SKU level data, we build it into the data warehouse. Everything that goes into making a true P and L I get on a day to day basis. Sara's Pulse gives you clarity. So your COO and your CFO and your CMO start speaking the same language. Contribution margin shifts teams away from hoping profits survive the season to manage them in real time. Book a walkthrough with the Saris Pulse team today. Click the link in the description and thank you Saris for bringing you this show.
- [40:05]
Mike Beckham
I think it's a, it's a consistent theme that I'm hearing from the operators who are doing the non first day payback model which is like you're a, I'm guessing you're not first order profitable. That when you're doing that model you have to be disciplined is pretty much my takeaway and that you said it, it's like your kids know your payback ratios like that. If everybody in the company doesn't understand and respect those payback ratios, you can get in trouble really quickly. And so like everybody we've had on here who has run that model successfully, I think you're echoing some of the things they've said and, and that's the reason why I think it's everybody it's great for everybody listening to this to hear it because it's not sexy but that like knowing your numbers inside out and knowing them up and down the organization, having discipline of sticking to them. These are, these are the things that are just prerequisites. You know, they're whatever like the, the starting point of being able to build the type of business that you've built. Is there anything else you would add there? Like have you seen a lot of change to your LTV over time as you've scaled up the number of people? Has LTV come down some. I've seen that in some businesses that as you get into less qualified people,
- [41:20]
Russell
your LTV compresses some for for us LTV's gone up. It it does change like different cohort their seasonality. If you're running like deep discounts or GWP's gift with purchase like like obviously higher discount could attract a different quality of customer which has a higher propensity for churn. But overall like in on the aggregate when we take those averages the the LTV does go up and that's we've never pushed price. We've never taken price. A lot of brands in the category do. I'd say we probably could have been smarter about that historically, but we've just never done it because we've been able to offer this affordable health and wellness solution. We're quite puritanical that we don't want to push people price onto the consumer, but we have ancillary products, supplements, treats and that helps boost the AOV and that's one of the reasons why LTV has gone up over time. The other thing I would add for for earlier stage this is it's do you understand how to measure this stuff? Like are you actually calculating CAT correctly? Question mark? What's how are you loading cat?
- [42:23]
Mike Beckham
What's an example of how you might do that incorrectly? Because it seems like I just take my meta budget, you know how much I spent on meta and divide it by new users. So like what are what are some ways where I might be some things you might have learned about.
- [42:37]
Russell
Sometimes folks will load or not load in like agency spend commissions like how does your top of funnel your brand budget impact that? So like at the end of the day like you include any of your
- [42:49]
Mike Beckham
team like your internal team that's focusing
- [42:52]
Russell
on marketing in cac we not on that's opex. We put that in the OPEX line item. But again but the measurement point also is on like the behavior of the cohorts and we learned this early, there were a couple of channels, I won't name them, but in the early days you could grow these businesses quickly because there was, you know, within the app universe, let's say, and you partner with those brands, someone will be in a gaming environment and want like the bigger sword. And then there'd be a host of brands you could choose from. If you buy the brand, then you get the sword and you can continue playing the game. Those chords were awful. I remember looking at like second order rotation and it was like, I think the churn rate was like at least 90, if not higher percent. So of every hundred customers, 90 churned out. Thankfully in the early, early days, you know, we were using tools like Looker, like a BI tool which then Google acquired segment and using that to tell us about cohort behavior. And oftentimes I think early, early stage businesses like zero to one, they're not thinking like data's like this kind of foreign concept and it's too expensive and I shouldn't do it. That's a later stage thing. Let's focus on like just getting revenue as high as possible possible. And I would, I would argue that as much as you can build in like data data systems or BI tools to help you understand what the heck you're doing or like how, how the business is performing, I think is really important. It just helps you avoid some of the landmines along the way. Kind of to the earlier science experiment conversation. It's like as much information that you have at your disposal will help inform the right decisions.
- [44:35]
Sean
Yeah, and with AI, everyone has a data analyst, you know, in their pocket. Right. So you, you don't have to spend crazy money on any BI tool. It's like, look, throw your data in a Google sheet and throw that Google sheet in Claude and you'll get some good answers. If, if you're doing $5 million a year and you can't afford it, that's rich. Does a lot of that right now.
- [44:54]
Mike Beckham
Well, and I'm going to add a point to that Sean, because this obviously isn't an episode about AI, but I think that the, the thing that's going to be interesting about the future is that increasingly that's going to be everybody's behavior. Just like, hey, I'm just outsourcing all my thinking on this subject to AI. What I am finding is that really where you want to live is that you have put in thought to a subject, you've done work in it, you understand what the number should be, what's normative, what's accurate and then you kind of earn the right to outsource a lot of the lifting mentally. When you just outsource it from day one, what you get is people that'll just blindly follow whatever the model spits back at them even if it's nonsensical. And that's when sometimes your team will say things that you're just like, that's clearly not right from like first principles from what I know about the business. And so anyway I, I, I think that obviously the AI stuff is going to be incredibly disruptive and incredibly helpful. But if you outsource all of your thinking on a subject then it's, it's really, it can cause really bad decision making. So I always encourage people to do things manually themselves first to have an understanding of what's true and how things work and then to really look to how do I automate this? How do I, you know, how do I outsource this in some way? Anyway, just a thought for, for the
- [46:19]
Russell
group and honestly and we with our, with the Allentown factory, it was all manual for the first like 12 months. Right. Some folks even that started working there like well why is this process automated? It's like well we have, we have, it's a, like a semi automated process but we don't know like, we don't know like whether it's you know, equipment efficiency or preventative maintenance or downtime or the labor model. Like let's just feel our way through the roof next 12 months. Let's make a bunch of mistakes and once we know the, the right way up the mountain then we can resource against that with the appropriate level of capex. But you know, it's this expression like suck it in semen. It's an English expression because I've been in London for a long time but it's like let's just do it for a little bit. And that's I think that's true. I, I would echo that sentiment, Mike. I think internally it's like let's just like do first. You know, it's like this AB mentality just like test it first. Then once we figure out the way, then let's dial it in and invest.
- [47:22]
Mike Beckham
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- [48:07]
Sean
Yeah, and it's kind of like you can't outsource marketing until you know how marketing works. Right? Like everyone who's ever had a horrible experience with an agency, it's because like, they don't know Facebook ads. And it's very easy for someone to do something horrible to your ad account that you just don't recognize. And then circling back to, you know, people not understanding what, what a CAC is. Warby Parker. When, when they went public, they were like, here's our marketing spend. Here's every order we've ever had. This is our cac. And it's like, so that was just, you know, cost per order. Like it was not new customer acquisition by any means. Because if somebody bought four times, they would be counted four times in that data and just shows even public companies this up. Russell, I want to talk about Omni Channel. Your space has a big Amazon like competitor in Chewy, but it also has a lot of these, you know, brick and mortar retailers. Are you doing stuff in Omni Channel now? Is that like a red herring? Should people avoid that if they're in the pet space?
- [49:08]
Russell
No, I mean it's still a huge opportunity. Ultimately, customers shop in multiple places, whether that's online or in pet or in brick and mortar. For us, a couple of things. One is we are primarily ddc. We also do sell on Amazon. We sell our treats supplements and pup gum, which we can talk about if you guys are interested in. Our newest launch is on Amazon as well. We haven't felt an urgency to go on shelf. It's just a different business. But, but given kind of payback and the economics and our ability to scale efficiently and profitably direct to consumer, we haven't felt a business need to diversify Channel. It's also a very different business. I mean, as you guys know, brick and mortar is different payment terms, different implications on working capital, inventory, cash, merchandising strategy, planogram scale. You need a lot of to build true scale brick and mortar. You need a lot of doors and you need the expertise and the manpower to help manage that, so there's, there's considerations there. Chewy is a different, interesting case study. I mean, Chewy is a, is a, you know, a retail platform. So we don't. I see Chewy as, you know, we, we compete with Chewy for maybe ad space and, and competing for attention otherwise. But they're not really a. They have some chewy branded product, but generally it's a retail platform. Will we be on shelf one day? Absolutely. I think it's, it's really a question of, of when and meeting the consumer and the customer where they're at. But to date, haven't pulled the trigger. We're talking about it, we're thinking about it. And there are brands in our category that have been successful. They've done it. They have kind of omnichannel brands as well. And I would say there's always mixed experiences. It's interesting. There's either legacy brick and mortar businesses that go online to try to do the D2C thing. And it's hard because the culture is brick and mortar. And all of a sudden it's like CPCs and CPAs and CACs and all the things we're discussing. Then there's the inverse of that of digitally native brands that go retail and there's a delta and there's some D2C brands that try to replicate even like the brand design system on shelf in retail. And it falls, it doesn't work like it falls flat. So I think, you know, for us, we want to be prudent operators. Ultimately, you know, we stage our decisions like we have our factory at this growth rate. To be able to support digital and brick and mortar is another entire consideration. We talk about, you know, operationalizing growth. I think if we, if we do retail, it's not going to be, you know, launch in one city or regional. It'd be a national play to like, okay, cool, great, let's do that. Who's, who's going to make the widgets? Right? We got to go back to the ops in the execution side of like, okay, we got to scale inventory. How much inventory do you want? We want in the balance sheet is inventory, eats cash. Like, what are the inventory turns? What's the sell through? So we start, we're kind of going back through that decision logic and you know, the, the arrows and, and the, the, the, to use the green button analogy, the green button is not like, go press the button. It's like, okay, it's like yellow, right? Let's hover and assess, which we're doing at the moment.
- [52:37]
Mike Beckham
Okay, so I think that to add just a little bit of commentary to what you said, it is very difficult to make a business work across a bunch of different channels and a bunch of different contexts. Because when you start the business, you really highly contextualize it for your first primary channel, usually. And if you haven't started with omnichannel, it's difficult. And that's everything from the packaging. You know, like, if you knew we were going to sell 100% of our products online, then you're going to make different packaging decisions than if it's like, well, we might sell some online and we might sell some in store stores, for example. And like another one that I'm convinced of, I mean, your team, obviously you mentioned this, but like, the expertise you have on your team is different based on how you contextualize the business early on. Another really big one that's sneaky, I think, is P L. That your P and L construction, how you think about pricing, how you think about margins. It is actually really difficult to change people's thought process about those things. I mean, somewhat you can kind of get stuck in a particular pricing model and then say, well, if we're going to go into physical retail, we're going to have to change our whole pricing model and that's not going to be optimal for online, but then we can be in both places and is that better? And so it's really disruptive. I think this is probably my advice here, as somebody who's done a lot of omnichannel, is that if you really want to do omnichannel, well, the earlier in your business, you realize you have that aspiration and are starting to try and think about it, the better, because there's a ton of pain and channel conflict and difficulty down the line. If you're a very mature business in one channel or one approach of acquiring customers and then you try and just, you know, stack another one on top of that. Some businesses are able to do it, but for the most part, it's. It's really challenging if you haven't started. And you, you said this, but this is another theme that keeps coming up again and again. The really good operators don't do things just to do it. They don't say, well, you know, other people are in physical retail, we should be in physical retail. They ask the question of does this make sense for our business? And they have the security to not necessarily do the hot thing or the thing that other people are doing just because other people are doing it. So I loved your answer. You know, like you're looking at it. If it's right for you and your business, you'll do it. But also you're not rushing into it, you're not blindly chasing growth in that way. You're being pretty intentional about it.
- [55:08]
Russell
Yeah. Thank you. And there's other considerations like assortment. Do you launch all SKUs or one SKU pricing?
- [55:14]
Mike Beckham
Absolutely.
- [55:15]
Russell
And we also personalize the product. So how do you offer that level of personalization on shell? There are some brands that have done it really well and then there's others. You know, it's heartbreaking. I've seen a number of DTC brands go live in Target in a number of different categories. Some have been wildly successful and then some you see in like the deep discounts or like the two dollar aisle in the front and they're just trying to push that. And like that, that's a signal, right? It's like.
- [55:40]
Mike Beckham
Okay, well to draw an analogy here, if you, I had a, my, my sister in law, her, her twin sister lived in LA and we, we visited her out in la and while we were out there she was telling us that something like 40% of Los Angeles turns over every two years. I don't know, Sean, you probably know the number, but there's like this insanely high turnover of the actual population base in Los Angeles. And the reason is you got a lot of people that come in and they try and get on, you know, with Hollywood or with something, you know, kind of talent based as a model and they don't and they churn out and you know, there's more cohorts that are coming in to replace them. So it's not like Los Angeles is declining in population. But here, here's the parallel. When you walk into a Target and you see 10 brands that you've never seen before, what you should process is that means that there's 10 other brands that churned out, right? And you don't see that. You only see what's on the shelf. But what you don't see is the graveyard of hundreds or thousands of brands that took their shot in Target and it didn't work. Just like the person who went to LA trying to get into a movie and it didn't work out and then moved back home. And so like you said, it's tough, it's tough to, it's not about selling in, in retail, it's about selling through and it's about staying in. And that's one of my big things. When I hired, I've said this before when I hired our chief sales officer under the role, I said, you think this is about this? This job's about selling things, but it's not. It's about making the right sales. And my advice is like you do not want to be in physical retail unless you have what it takes to stick for multiple years because otherwise you're just not going to love the economics. And it is going to be a little bit of a downward drag on your E com business which you kind of mentioned. Like I'm one of my, I'm very close with the guys running baseball lifestyle and it's one of the better growth stories but they're starting to see, they've got this amazing growth but they're also starting to see that like hey, all of this 300% year over year physical retail growth does actually eat into E Comm a little bit. So it's like it is additive on the whole when you get into physical retail, but it's not all additive. Some of that is taking customers that might have converted online and it's moving them over. So anyway, and there's less margin in physical retail. So I'm obviously a big proponent of Omni Channel. I just think people need to be aware that there's certain, there's definitely trade offs that come with it.
- [58:08]
Russell
That's it. And then, and then kind of the other my final thought on this is how do you support that from a marketing side? Right, so it's not meta ads. Are you doing billboards? Like what's, what's your top of funnel strategy? Are you pushing radio, are you pushing podcast, linear ott, ctv? Like what's your playbook of stuff that's like really measurable versus stuff where you're going to get an impression and maybe in store sale like there's, there's like that gray area and so there's also some trade offs there kind of even support retail launch. So anyway I think it's exciting at the end of the day like I think for any brand being on shelf. Is it a wonderful moment if you can get on shelf as like a credibility builder. But then it's, it's the grind I think to your point about like staying power. So we'll see. I will let you know when we, when we press the green button button.
- [58:58]
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- [59:42]
Sean
All right, so let's talk about this factory you've brought up a couple times. It's never easy to launch something in the physical world like that. You have permits, you have hourly employees and you also have to. The downside of a factory is you're all the demand. So you have to keep that thing running at 99% uptimes or whatever. And you also can't like make too much or else now you have a perishable food problem. Right. Or so what, what was the driving force to be like, we have to open this factory and how long was that process and where are you now?
- [60:16]
Russell
Yeah, so. So launched on Kibble in April 2020. You know, the business grew very rapidly as I mentioned in our. In our peak, we had outsourced to six co manufacturers across the country. And there's trucks driving from east to west coast up and down again. I refer to that as kind of like the three dimensional sudoku puzzle which was like unbelievably difficult to manage from a supply chain perspective. So we sat down and decided, okay, let's insource. And then the question was like, what does that actually mean? So let's own supply, let's build a factory. We actually built what's called a box in a box. So it's an existing shell and we built walls, infrastructure inside. We made that decision in kind of late 2020. We went live with this facility in October of 2022. I mean it's been a long journey. The first was, was identifying the where. We looked in Connecticut, looked in New York. Old infrastructure as far as like existing shell is concerned. We looked in the Meadowlands as well for like warehouses. You could build a factory inside. We almost pulled the trigger obviously it's like close proximity to Manhattan for all the obvious reasons. Since headquarters there. We came close on a couple of facilities there and I'll never forget we were standing in the parking lot, it was raining that day. I swear to God. There was probably three or four feet of water. Water, like rushing into the parking lot. And we looked at the agent, the broker. We're like, is this normal? And, and the, the like, the agent started laughing and we said like, of course it is. It's the Meadowlands. It's built on a swamp. And like, we're like, do these buildings flood? And they're like, well, maybe. We're like, okay, let's flip back. So we're like, let's go west. So we ended up going to Allentown, Pennsylvania. Amazing road infrastructure. There's a bunch of other big businesses there. You know, FedEx is there, Amazon, Chewy list goes, Ocean Spray, Dr. Fabric here. List goes on and on and on. Lehigh Valley's thriving great labor pool. So we, we planted roots there. The process was, was hard, expensive. You know, we were in bathroom trailers, brake trailers, office trailers, you know, talking to influencers and our marketing team at the same time as like, you know, the jackhammer or bringing in equipment. And so that was a process for sure. We're now three years in. You know, we've got a hundred people in that facility and we are physically there a lot every week. We talk every day. And it's, it's this balance of building inventory. What skew to your point, how do you like verticalize and bring products from upstream suppliers all the way through to the factory to packaging and then out to warehouses is for last mile distribution. I would say it's been transformative from a P and L perspective. You know, adding 30 plus points of contribution margin, fully loaded like contribution margin, cost of good sold, picking, pack, shipping, delivery. It's been a big game change for the business. And I'd say crucially we control the supply when you rely on others. And again, I'm not suggesting that everyone should go build a factory. It's obviously difficult sort of reasons, but you know, for, for a business growing this very important for us to be able to own that supply chain piece. So it was a very difficult. But it, it's paid off for us ultimately. And like we've continued to scale that facility and we've continued to automate that facility and find and find efficiency. I think it's, it, it's contrarian. I mean most, most brands don't do factory and certainly in the pet space, most people just outsource. Outsourcing is easier. I would say the most important purchase consideration is the ingredients in the product. Like a consumer will look at an ingredient panel to inform whether that's something they want to feed their Dog. And they ask our customer service team constantly, well where, where is it sourced? Where is it made? And it's like, well we make it, we source it, we control the supply chain. No other brand can make that statement. Any other brand in the cohort or category, they're like, I don't know, that guy makes it, where does he get the pro? I don't know, he sources it. So I think inherently there's this big disconnect of brands that are very good at marketing but don't understand fundamentally the product versus the spot and tango and, and, and, and don't get me wrong, it took us years to do this. This is not like oh, we waved a magic wand and here we are car. We've built a muscle over time. But I'm a big believer in an asset and it's many ways how companies used to be run, right? Like you own your manufacturing and you know, you're prudent operator, P and L manager, etc. So it's been a really cool. I've learned a ton about equipment and building and all the rest of it stuff. Things I did not bring to the table but some expertise that I've gained along the way the way.
- [65:08]
Mike Beckham
So one of the observations I would add here, Russell, is that there is a flywheel of competence in many areas of your business. And it turns out that you being way better in operations makes you way better in marketing. And that the better you get marketing, the better you get in operations, the better you get in data, the better. So it's like okay, we, we find product market fit and we use this volume to build out vertical integration. And so our Cogs is whatever, 15%, 20% less than it would be otherwise. And that means that our LTVs look this much better, probably even more than 15 or 20% better. And because our LTVs are this much better, we can spend this higher number on CAC than if we were just buying this from somebody else. And because of that we can get a lot more volume which makes our factory more efficient and we acquire more customers and we have more data and we have more momentum and it's, it's a positive feedback loop. It's a flywheel. And one of the reasons why I wanted to highlight this is that the kind of the worst of our industry is the kind of TikTok drop shipper mentality that you see sometimes on Twitter of like, well, I had to do was spin up these three ads and you know, you like I'm on a five million dollar a year run rate and like that stuff never makes any money and it certainly doesn't last. What lasts is being good across multiple areas. This idea of skill stacking I think is the way to think about it that when your business to build a business that's resilient, especially in the years ahead, you're going to have to be good in multiple areas that are complementary to each other so that your business can do things that other people can't really compete with with. And my guess is you're very, very difficult to compete with. It's possible that. I don't know. I'd love to hear if you think this is true. But it's possible in the dog food space that nobody has your particular set of skill stacking that you've developed. And so when you talk about the combination of marketing and operations, you're an N of one that nobody can quite do the combination of things you can do because of the competencies you've built. That wouldn't be true if you guys were just great at paid ads. And that wouldn't be true if you just ran a dog food factory. You know, it's what makes it special is the combination. And so this is a thing that I'm thinking about constantly with our businesses and things that I'm building is how am I building complimentary skill sets that stack on top of each other where I can just do things that nobody else can do. Because it's great to compete with people and to be able to out compete people. But you know, what's better is to compete in areas where nobody wants to do the exact thing that you're doing. They either can't or they, or they, they won't do the exact thing that you're doing. That's a lot easier way to make money. And that's how I want to make money. And that's, that's what I take away from your story is that you guys have kind of built that type of a business. Yeah.
- [68:08]
Russell
And we call it competitive moat. It's hard to replicate what we're doing given all kind of the reasons and some of the background that I provided. And you know, that's been like an incredible asset for the business as we've kind of like thought about the ops and the marketing piece. And then other comment I'd make is, you know the expression like you don't know what you don't know. And I'm always the first person to raise my hand and say like I don't. What's I don't know. Go figure. It Out. I have a question. Here's a dumb, I have a dumb question. It's when you understand supply chain, you know when and how to ask either a 3 PL partner or last mile delivery carrier or your trucking company or otherwise. Like, well, hang on a second. Like we shouldn't be paying X per pallet store or Y on price. And like you've, we've gotten very. But again that's, that's taken like time. The kind of the skill stacking. But if you don't know to ask the question is the point by seeing you're doing, you won't. And I think with a lot of these companies there are some so many margin wins along the way. Some like super like tactical ones but even like more strategic where you start actually building this higher contribution margin. Kind of the earlier plan on paybacks. But, but see like just getting the reps and the scar tissue, it's like, oh, that's how it works. Okay, I had no idea. Let's go ask a bunch of questions about that. And, and the hope being that sheds light on maybe a new opportunity where your team can say, oh, let's keep exploring. And all of a sudden there's a up a positive outcome.
- [69:43]
Sean
All right, Russell. Well, we're getting towards, towards the end of the pod. Now it's the plug section. Tell us about all things Pup Gum, this revolutionary new product that everyone's going to rush out and buy. 20,000 sales on PUP Gum we expect from the audience. What is it?
- [69:58]
Russell
So pop gum.com we launched in May of last year. So what is it? It's the, the newest. It's innovative. It's like first of its kind. It's a dental chew. Categorically it's called Pup Gum. Of course that's provocative because dogs can't chew gum. In fact, we ensure encourage consumption. That's how it works. So what is it? Firstly, in the kind of new product development phase, a lot of people have like a dental stick in the pet space. It's all made by the same con man. It's elongated, it's star shaped, it's a kind of a bland color. And people call it literally like dental stick. It's like an aov. Put it in the box. You know, enhancing the economics. We kind of started on that process and it's like, hang on a second guys, like what, what can we do differently here? Is there a way A to improve the ingredient deck and B, let's have fun with it. And so there was this like pliability aspect to the product that kind of led us to this, like, this concept of gum because it's chewy. I think half our team thought it was like a really dumb idea. It's like, whatever you do, don't launch a gum for dogs. That's like bad for business. Our view was like, our core business is food. We're launching outside of the spot and tanker ecosystem as Pup gum dot com. It's playful. If it works, amazing. And if it doesn't work, turn it off. Right. It's blue. Our primary competitor. Their product is green. What's novel inside is a hard clinical claim. Postbiotic took two years to develop. On the R and D side, the postbiotic removes the biofilm in a dog's teeth. The biofilm leads to plaque. Plaque leads to bad odor. This reduces the biofilm and eliminates that. Imperial dental disease affects 90% of dogs 3 years of age and older. So is there a problem? Yes. Is it a big category? It can be. Is there a lot of innovation in that category? No. We launched Pop Gum. It's growing faster than our Uncibble Hero product. In the early days, we've stocked out. It's been a fun ride. You can buy it@popcom.com it's been. We actually, I'll just share quickly. You're running out of time. We launched an internship for a dog breath sniffer. We launched the product and we had over 500 applicants, mostly MBAs. I think the New York Post picked it up and said it was the worst internship in history. Like smelling dog breath is kind of a. But it was playful and fun. Seth Meyers picked it up. So it's been a really fun brand to launch and first time it's been kind of outside. You can also buy it as a spontaner.com customer. But it lives outside the ecosystem. There's some reasons for that, but you can pick it up at Puck. It's been. It's early days yet, but so far going, dude, I love it.
- [72:46]
Mike Beckham
I'm in. I'm gonna be a customer.
- [72:49]
Russell
Mike, Mike, send me the address afterwards. We got the dogs some unkibble, some Pupcomb, etc.
- [72:54]
Mike Beckham
Well, I'd love to because it is interesting that you're continuing to see innovation in the space. Like, my dog had their. His, like, I guess his update and his vaccinations a week ago. And. And there were two different things that came up with the. The vet that I was like, oh, I didn't realize this existed. M1, I bought. I bought a different product because I didn't even know it exists. But pup gum sounds even superior to it. Like, this idea of instead of brushing their teeth, what you do is you add a little bit into their food. You add something that kind of, like, when they eat it, it works kind of like a greenie or whatever, but it's like, it's just naturally part of their food, which sounds like what you're doing here, but you're doing them even more than that.
- [73:30]
Russell
That's it.
- [73:31]
Mike Beckham
Which is awesome. Such a cool, like, innovation. And then the other one was this. He loves being around us, but when he's away from us, we put him in his crate. He just goes ballistic if he knows we're in the house, because he just doesn't want to be in his crate. And I was asking the vet, and they were like, well, there's this dog pheromone thing that it releases a dog pheromone like, that. They. That's similar to what they smell when they're nursing as a baby pup, and it calms them down. I'm like, so I've got a. I've got a dog pheromone releaser, and I'll let you guys know how that goes.
- [74:04]
Russell
Does it work?
- [74:05]
Mike Beckham
I haven't. I haven't tried it yet. But I mean, it. It was just interesting to me that I'm like, wow, okay. Those are two new things that I was not aware of. You know, I've had dogs before most of my life. We just haven't had them the last couple years. And so. But this is. This is a really cool product. I mean, and like you said, it's innovation and. And it's solving a problem that everybody has. Like, my. My dog's breath is, you know, terrible. So.
- [74:29]
Russell
And I would say, you know, the expression innovate or die. Like, we need to stay ahead of the curve on product innovation. And honestly, we see ourselves as being like, we offer highly differentiated products, and we're staying ahead of the pack. Forget the operational piece, like, just on the product side, there's more coming. You know, we have a very strong product development team and new product development cycle, so new stuff is coming out. I mean, we're obviously focused on the core of the business, but, you know, it's there. There's a lot of opportunity yet within pet is given that. I think I read a stat the pet category is larger than coffee and razors combined. Okay, just do. It's of, like, scale. So you think about that. It's like, wow, well, what else can we do, dude?
- [75:12]
Sean
Well, I love it, man. I want to stop seeing you win. I love the new products. Thank you for coming to tell your story. You were transparent. You're an expert. You're all all over the place. And hell yeah, brother Spawn. Tango to the moon. Awesome, man.
- [75:26]
Russell
Thank you so much. Really fun chatting. I appreciated the dialogue and feedback. Really enjoyed it and look forward to keeping in touch.
- [75:35]
Sean
We'll end it there. Thank you so much.