Obsess about unit economics — It’s as real as it gets. And it’s the one thing the entire business depends upon. Now more than ever, investors look for profitability and a viable business model than ever. Know your costs for making the product, and delivering the product and everything in between.
Clearly define who your core consumer is, and really service them with an exceptional experience, across all touch point. Omnichannel experience is not just a buzzword, it’s what provides a brand longevity.
Asa part of our series called “5 Things You Need To Create a Successful Food Line or Specialty Food”, I had the pleasure of interviewing Hema Reddy, founder and CEO of Crafty Counter, a consumer products brand, dedicated to making plant based foods that are bold and flavor forward. Prior to her entrepreneurial ventures, Hema was with IBM for 14 years running global initiatives in marketing and strategic alliances. She also produces the Food Startups Podcast. Hema has spoken at events globally, and occasionally volunteers her time teaching cooking classes in the Austin culinary circuits. Hema has a Bachelors and Masters degree in Computer Science, with 9 patents under her belt. She lives in Austin, TX with her two kids and husband.
Thank you so much for doing this with us! Before we dive in, our readers would love to learn a bit more about you. Can you tell us a bit about your “childhood backstory”?
Igrew up in India and immigrated to the U.S. about 20 years ago. The most fond memories I have of my childhood are all around the breakfast, lunch and dinner table. By the time we would eat breakfast we are passionately discussing what we would eat for lunch. The love and appreciation of home cooked meals ran deep in our family. My mom is an excellent cook and my dad, to put in the mildest terms, a fanatic about ingredients quality and produce. Finishing your plate, having sufficient variety of vegetables and a balanced meal was non negotiable. We didn’t have refrigerators in the early part of my childhood so we made meals three times a day. I learned how to cook as early as 8 years old, given that I am the oldest of four sisters. A lot of how I think about food and care about what we put in our bodies comes from the fanaticism I grew up witnessing. I am not kidding when I say, I got reprimanded at the same level if I picked bad produce at the farmers market as I did if I got bad grades at school.
Can you share with us the story of the “ah ha” moment that led to the creation of the food brand you are leading?
I always had the entrepreneurial itch even during the years in my corporate career. When my daughter was sleeping through the night, I decided to take a leap of faith and go all in. I didn’t have one particular “Ah ha” moment, rather it was a process of carefully thought of ideas upon deep reflection on who I am, and what excites me and what is that higher purpose I want to live up to. It had to be authentic to me, so I selected one beverage concept that doesn’t exist in the US and I have several memories of it through my teenage years as a consumer. Another food concept came from foods I made as a mom, that solved the pain points of busy moms that don’t want to sacrifice nutrition when in a pinch. I already knew the second food concept was going to be a winner because several moms and friends were shocked at how good they tasted and kept asking me to share the recipe or make it for their families. To see the happiness on their faces when their kid ate Wundernuggets, and the parents finished a whole bag, I knew we were on to something.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?
My husband and I, and usually most of our friends love spicy foods. I guess you could say you attract folks with similar taste buds 😉 When we first launched, we had a mild and spicy flavor of Wundernuggets.
Based on the feedback from our immediate circle, we bumped up the spice levels on the spicy variety. That cost us an entire pitch competition, as it basically burned one of the judges mouth. And there were several people watching, to make things worse.
We learned the hard way, to caste the net much wider when launching any product and get plenty of trials and feedback before bringing it to market.
What are the most common mistakes you have seen people make when they start a food line? What can be done to avoid those errors?
No journey is the same, and there are several factors that affect the success of a brand even within the same category. Having said that, the most common mistakes I have seen are
- Not enough validation and taste testing done prior to launch. There are some products that have beautiful packaging and I would never buy them again.
- Not managing spend, i.e. keeping a tight grip on the ‘cash on hand’. CPG is capital intensive and knowing the cost of doing business in a channel is key.
- Too much focus on customer acquisition and not enough focus on customer retention or increasing the lifetime value of the customer.
Let’s imagine that someone reading this interview has an idea for a product that they would like to produce. What are the first few steps that you would recommend that they take?
- Nail down the supply chain and know how to achieve economies of scale; Better yet, plan for vertical integration with the suppliers. This exercise eliminates surprises down the lane as you can reformulate early on when you are small.
- Investing the time to develop a robust go-to-market strategy. Manufacturing is the Achilles heel for food products. The initial commercial kitchen can only go so far. It’s crucial to plan for growth phase and knowing who the co-manufacturing partners can be and starting those conversations early is smart. There are tools such as the lean canvas that can help guide it: https://leanstack.com/leancanvas
- Test, iterate and repeat until you know you have a winning product that delivers on taste.
- Know how to find, target and market to your core consumer as the customer experience when they eat or drink the product for the first time makes a big difference.
- Get as many people to consume the product so trial is everything.
- Run the idea by some investors to get their thoughts as they may be the ones you will reach out to one day. Ask the right questions.
Many people have good ideas all the time. But some people seem to struggle in taking a good idea and translating it into an actual business. How would you encourage someone to overcome this hurdle?
- Build the right team from the get go, if possible. It gets tough really quickly and having a strong core team of co-founders will increase the chances of success and traction.
- Find the right advisors early on, that are experts in the category but have also lived the hustle first hand. Talking to senior executives from Big CPG (Coke / Nestle / etc.) in the early days is hardly beneficial.
- Get the a good fractional finance team that has their eyes on the end to end business on a weekly/monthly basis.
There are many invention development consultants. Would you recommend that a person with a new idea hire such a consultant, or should they try to strike out on their own?
I have hired quite a few, most of them didn’t pan out even if they had glorious resumes. Some of them really helped tackle a task very efficiently. It depends upon the domain expertise required. I would get at least real life referrals based examples before making the investment.
What are your thoughts about bootstrapping vs looking for venture capital? What is the best way to decide if you should do either one?
It really depends on how you define success and what trajectory you want for your business. Some brands show some early traction, raise money and continue to do that based on top line revenue, among other factors. They may have spent $2M to make the $1M in sales. But they are perhaps also pacing for a quick exit. Some brands take the time to really build their consumer base and brand efficacy and they run scrappy, which might add a few years in their growth trajectory. They want to maintain control on the innovation, and key decisions and that matters to them as the founding team.
Can you share thoughts from your experience about how to file a patent, how to source good raw ingredients, how to source a good manufacturer, and how to find a retailer or distributor?
I filed my own patent, looked up the guidelines and it went through smoothly as it was just a trademark for our brand name Wundernuggets. However if you are patenting a machine or a process, I highly recommend getting a good IP attorney with CPG expertise.
Sourcing a manufacturer can be easily tackled if you have a healthy ecosystem locally and nationwide (slack channels/Facebook groups/mailing list forums etc). It depends upon how specialized your manufacturing process is. If you are making a sauce it’s pretty straightforward, for instance. I recommend this book by Will Madden: https://www.amazon.com/Separating-Man-Co-Contract-Manufacturer/dp/0990772896
Find early distribution is tricky. The easiest start is the local Co-Op stores that are very local business friendly. After that level of validation, and based on your go-to-market strategy, either hire a good regional broker or reach out directly to the stores asking for their ‘category manager’ or ‘buyer’. I have even reached out to some on LinkedIn even. It’s important to know what channel your products fit in, natural or conventional or c-store to start off with.
Here is the main question of our discussion. What are your “5 Things You Need To Create a Successful Food Line or Specialty Food” and why? (Please share a story or example for each.)
- Be scrappy — We have bought tables and chairs prior to a food show because it saved us $1000 and made our booth flooring to cut costs.
- Manufacturing viability — It took us three years to find the right manufacturing partner where we could establish a line of sight towards profitability.
- Grit and perseverance — Sales cycles are long and its basically organized chaos. Being calm under crisis situations is an art and science and if it doesn’t come naturally to you, ready and practice that muscle. We were on a cruise in the middle of Alaska when a production run in thousands of dollars failed. Logistics were delayed and we incurred huge losses. I was able to handle that news and then go to a cocktail mixology class in the next hour with my husband as we were celebrating his 40th…and still have a good time. You cannot change what’s done or what you cannot control.
- Have alternate means of living — These days with unprecedented food and beverage innovation, it’s incredibly competitive and sometimes it may be a while before you see financial success. Ensure that either you have a nest egg or a partner that’s bringing in the paycheck before you go all in full-time. There’s a reason why approx. 80% of startups fail — and its usually because they have run out of money or the founder couldn’t sustain the lack of steady income.
- Obsess about unit economics — It’s as real as it gets. And it’s the one thing the entire business depends upon. Now more than ever, investors look for profitability and a viable business model than ever. Know your costs for making the product, and delivering the product and everything in between.
- Clearly define who your core consumer is, and really service them with an exceptional experience, across all touch point. Omnichannel experience is not just a buzzword, it’s what provides a brand longevity.
Can you share your ideas about how to create a product that people really love and are ‘crazy about’?
They solve a dietary restriction or provide an indulgence element that delivers on taste or have a superior nutrition profile that’s currently trending. Authentic storytelling and pre and post purchase experience is paramount and runs parallel to these.
Ok. We are nearly done. Here are our final questions. How have you used your success to make the world a better place?
We are taking a stance on what it means to eat plant based foods. We are redefining plant based foods as those made from simple whole food ingredients and global flavor profiles that provide a superior taste and nutrition. Our plant based Wundernuggets are made of bengal gram lentils and veggies and no artificial ingredients, free of top 8 allergens. By providing access to convenient addictively delicious foods we are taking market share away from the animal protein based meals, which are directly linked to GHG, not to mention inhuman as most animal protein sources come from factory farming.
You are an inspiration to a great many people. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger.
Tackle hunger in underprivileged population via organized sharing of non-perishable items. Just like every family has a recycling bin, there could be state supported canned food drives every week. I don’t understand why such drives have to happen once or twice a year versus all year around.
We are very blessed that some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US, with whom you would love to have a private breakfast or lunch, and why? He or she might just see this if we tag them.
Natalie Portman or Snoop Dogg.
Thank you for these fantastic insights. We greatly appreciate the time you spent on this.