BRAND SECRETS AND STRATEGIES

PODCAST #75

Hello and thank you for joining us today. This is the Brand Secrets and Strategies Podcast #75

Welcome to the Brand Secrets and Strategies podcast where the focus is on empowering brands and raising the bar.

I’m your host Dan Lohman. This weekly show is dedicated to getting your brand on the shelf and keeping it there.

Get ready to learn actionable insights and strategic solutions to grow your brand and save you valuable time and money.

LETS ROLL UP OUR SLEEVES AND GET STARTED!

Dan: Welcome. Before I begin, I want to remind you that there is a free downloadable guide for you at the end of most every episode of the podcast. I always try to include one easy-to-download, quick-to-digest strategy that you can instantly adopt and make your own. One that you can use to grow sustainable sales and compete more effectively. Remember, the goal here is to get your product on more retailer shelves and into the hands of more shoppers.

Here's what you'll learn on today's episode. Today, you're gonna hear about a brand that was actually born in a kitchen. The original distribution service for this product was a small fleet of two little red wagons. Yes, you heard me correct. Two little red wagons. This is a brand that was bootstrapped and eventually grew to become the number one brand in the category in several leading retailers. So how did they accomplish this miracle? Well, you're gonna hear all about it on today's episode.

We also have a really good discussion about how you can improve your trade marketing efficiency. Let me explain. Trade marketing is typically the single largest line item on every brand's balance sheet. Trade marketing includes getting your product on the shelves through slotting and promoting and all the different things that a brand has to do to get their product in the hands of new shoppers. The challenge is that this is an extremely expensive endeavor. If brands don't get this right at the very beginning, before you even launch the product, you could spend a tremendous amount of money on just trying to buy one facing on a retailer's shelves.

What we discuss on this episode are several different strategies to increase your ROI, your return on investment, and give you more runway so that you can better use your funds to help grow your sales and grow your brand. I give Joel several tips and strategies toward the end of the podcast that you can use on your own to help you get more runway out of your funding. It's my belief that being a CEO of a brand should be more than just going out and trying to find more and more and more capital. I'm working hard to help you maximize the amount of money that you have so that you get more runway out of it. So you get more sales. And so that you can get your product in the hands of more shoppers. Ultimately, that's our goal, right? Now, here's Joel.

Joel, thank you for coming on the show today. Before we get started, can you tell us a little bit about yourself and your journey to Kodiak Cakes?

Joel: Yeah, Thanks for bringing me on, Dan. I love what you're doing. Your podcast is great. You have a lot of incredible content out there. So it's good to be on your show. And I think you're doing some great good out here. You've got a ton of content and I think you're helping entrepreneurs in an incredible way. So I love what you're doing.

But, yeah, a little bit more about me. I got into the pancake business back in 1995. Or I guess '97. My brother John started the Kodiak Cakes in 1995. And I took it over in '97 when I was just 23. And John came to me one day and he's like, "Hey, Joel. I'm done with this little pancake thing and I'm gonna shut it down." He wanted to go back to school. And so he said, "If you want to do it, it's all yours." And I was like, I absolutely wanted to do it. I wanted to be an entrepreneur and I thought that sounded really fun. And so I decided to take it over.

Now let me back up just a little bit. So back in 1982, that's when my Mom wanted to sell her pancake recipe and make a mix out of it. And so I was eight years old. And so she made these little homemade pancake mixes in brown paper lunch sacks. And she hand wrote on these bags how to make it. And we loaded up my little red wagon and I went around the neighborhood and sold these little homemade pancake mixes. So, I mean, that's really how we got started. My Mom was really a natural foods pioneer, and we were into health eating ... And she saw a need for more healthy foods and wanted to sell her pancake recipe as a mix. So that's how we really got started. And it was years later when my brother John took the idea and turned it into a company in '95, like I said.

So I took it over in '97. I was a college student going to the University of Utah. And I bootstrapped this thing for, you know, seven years really on the side for the next seven years or so. And until 2004 when I jumped in full-time with it. And at that time, my Dad, who was retired ... I think he was about 65 or so at the time ... He started helping me and the two of us just started building this little company. I think the revenue at the time was 150,000 bucks, total revenue. And then, you know, he and I worked on it together for about the next four years till we got it to around just under a million dollars-

Dan: Wow.

Joel: And he retired, you know? And I kept going with it and I hired Cameron Smith, who's my COO and became a co-founder for me. And he and I have just, you know, taken the business since then and continued to grow it and got great momentum. And, you know, in the last several years we really just started to get Kodiak Cakes on the map. So that's really kind of my background.

Dan: Well, I appreciate your sharing with that. And if you remember, I actually met you once. I had a nice conversation with you at Expo West a couple of years ago right after you had been on Shark Tank. And Steven Hughes said I had to talk to you. So I appreciate it, 'cause he was on Episode 60. So he's a huge fan of what you're doing, and I am, too. And by the way, side note, my wife and I have recently started buying your products. And she's using them to make breads and other products.

Joel: Oh, that's great.

Dan: Which is really creative. And she is amazing.

Joel: That is awesome. That is pretty cool.

Dan: Yeah. It's amazing the stuff she comes out with. The different products and the different snacks. And I love it. But bottom line is its great to have a product like yours on the market or on the shelf. Let me back up a little bit. Also, I actually did some work for a mainstream brand in your category and came up with some really unique strategies to be able to help brands like you. One of those strategies was used by unfortunately one of your competitors. Actually, I gave it to Kroger, too ... And so they've started adopting it and I can get more into that later. But the bottom line is this: It's natural products like yours that are driving sustainable sales across every category, across every retailer, across every channel. So that's your reason for being.

And thank you for the compliments. I want to celebrate the fact that you're doing something unique and different. Creating a healthier, better-for-you product. And then how you are taking it to market. So you talked a little bit about your strategy and building it out. I think that's a great story as far as you guys delivering it in a little red wagon. So when you said you bootstrapped it, when you started getting this thing going to go from where you were to a million dollars, that's phenomenal. Where did you start? What challenges did you have? And then how did you gain so much traction so fast?

Joel: Yeah. No, good question. I think ... Well, where we started originally was we had one SKU, which was ... You know, that's like probably in a lot of ways mistake number one. Having a one SKU business is pretty darn tough. But that's all we had, and we really didn't know anything about this CPG industry. So anyway, we started with this one product and we sold it into kind of the gift market. Gift shop channel. And so, you know, it was my brother and I ... I helped in the very beginning do sales. And we went around to the little gift shops around here in Park City, Utah.

We went to Park City, Utah, Main Street, you know, we went to Jackson, Wyoming and Sun Valley. Started in these little ski towns. And started selling just a case here and a case there to little gift shops. And I think we picked up about 50 gift shops pretty quickly. And then, you know, then I was done helping John for a little while. So then he was just UPSing case-by-case to all of these little gift shops. And pretty quickly realized that we needed to get real volume to ever make money on this thing. So realized that we needed to get into grocery and start being able to sell by the pallet.

And so he worked on that. He got QFC Grocery Stores up in Seattle, that was our first chain to carry it. And it started to actually sell pretty well. But we were, you know, we didn't have any financing. So that was another reason why it took us so long. We had no money and we were bootstrapping. We didn't have any, you know ... Hardly had any of our own personal money to put in. And so we didn't know the industry. So it really did ... It just took us a long time. And back in those days, you know, in the late 90's, there wasn't a lot of venture capital money going into food, either. And so I feel like we were kind of forced to bootstrap in so many ways.

So, you know, here we are just kind of bootstrapping this thing along for many, many years. And finally started to get a little bit more momentum. Got a couple of more products out. And started to build kind of a distribution base. And all of this, by the way, for many years was distributor-based business, right? So we couldn't go direct, because we weren't moving enough. But the distributors liked us and they thought our movement numbers were pretty good. So we were able to start building a wide distribution. Then in the late 2000's and you know, maybe around 2010 and 2011, we started to innovate and started to come up with more products that could be slightly more disruptive.

And so then we continued to build. We got into Target stores in about 2012 with two products, two SKUs. And that was awesome. It wasn't explosive yet, though. And even around 2012, we started doing a little bit of Costco business and around here in Utah. And that started to go pretty well. 2014 was I would call a real reflection point year for us for two reasons. Now, one of them was just lucky. You mentioned Shark Tank. We went on Shark Tank and that aired in 2014 in April. Two months later is when we launched our protein SKU called Power Cakes, and that's where we took our original flapjack mix, we added protein to it because I had been adding protein to my pancakes for years. So then we kind of finally thought, "Maybe this could be mainstream?" So we did it, and we added it, and we took it to market. And it just took off. I mean, it resonated with millennials like crazy. It brought millennials back to pancakes, whereas they weren't really buying them before.

It's what brought new people back to the category. And it started to really grow the category. And I think what was really phenomenal about it was it became the number one pancake mix in the set at Target immediately. And so it blew out Aunt Jemima, which had been number one there. It blew 'em out in 2014 by 20%. We were outselling by that-

Dan: Wow - Congratulations.

Joel: Yeah. Thank you. And so it was really cool to see that. But I think probably one of the greatest stories about that ... And I think what we learned about innovation and about how to innovate, you know, tired categories was that almost all of the revenue that we brought to the category was incremental. So we didn't cannibalize the other brands. They kind of remained flat and we brought new revenue. So the buyer was ecstatic, because we're building the category for that buyer. And so then it's like, "Well, what else can you guys do? What are some more products? Let's keep going with this."

And so over time we continued to build and grow that category. And now we have a 54% market share at Target and the category's up. The category's way, way, way up since that time when we went into the category. And so that was a great story and we learned a lot about, you know, what innovation really means. What it means to have something work

Dan: 54% share. That is unheard of. And by the way, I was thinking ... I mentioned earlier that unfortunately one of your competitors. What I meant to say by that, is that they didn't execute properly. And so it didn't really come to fruition. So what I wanted to get to, and thank you for sharing this, is yeah, the mainstream brands are tired. They're not driving sales in the category. Some of the mainstream brands are actually cannibalizing some of the private label products out there. More importantly to your point, it's a stale category. And when you go into a typical retailer, and they've got eight or 16 feet of pancakes plus pancake syrup and its a category that is basically ignored and neglected and dead and nothing's going on.

So when I went to Kroger, I was talking to them and suggested to them they start bringing in the natural products. Not putting them on the top shelf or the bottom shelf, but putting them in-line, eye level. And so the idea was to help integrating natural products, healthier better-for-you products like yours into the category. But more importantly, giving consumers an opportunity to make a choice when they get to the shelf. So when they get there and they hold up whatever they usually buy and they hold up Kodiak Cakes and they can say, "You know what? This is healthier. This has protein. This is a better product. This is why this is better for me." And then they can decide for themselves if that's a better spend, one. And number two, as you alluded to, thank you, that that's how you drive sustainable sells across any category.

So when you started moving into mainstream, where were you placed in the store? And did you have any conversations along that line? And then we'll get to the distribution piece in a minute.

Joel: Yeah, we did. For the most part, we were in the mainstream sets all along. That was the one thing that we tried to do. And we were deliberate about that. Now and then somebody would place us in a natural set that they might have had in the grocery store. But we would always try to argue that, "Hey, we want to be in the mainstream set. We think our product, yes, it's a health product, but it's good enough for the masses." And I think that was something that we did that worked in our favor. Especially as, you know, as healthy products had become more mainstream over time.

But the thing that we ran into ... Some of the walls that we ran into were kind of exactly what you were talking about. You were talking about how often the buyer looked at products like ours, even if they wanted to put us in mainstream as ... They looked at us as specialty products, and those usually go on the top shelf, you know? The slower-moving products go on the top shelf. And I there was some mistakes made on buyers' parts there because of exactly what you said. We were showing up to market with a product that was $4.99 to $5.99, and sometimes even higher than that. And everything else in the category was maybe $1.99, maybe $2.49.

And so the buyer mentality for so many years was, "It's all about price. It's all about price. I can't sell anything for more than $2.49 in this category." Well, even from the beginning, our product moved. It turned. And people understand the value proposition and they wanted to pay for that. They understood that it was whole grain and it had a lot of healthy benefits that the commoditized products didn't have. And so, you know, some buyers started to learn that, right? And so we started to get some eye level placement and they started to realize, "Man, if I merchandise these products and help my customers find out about them, that's another way to grow my category." It isn't just all about price.

And so, you know, we still have buyers with that mentality. We do, but they are starting to get more strategic about it and it's helping products like ours do better.

Dan: Good. Well, and on that note, I wrote a feature article for The Category Management Handbook 2016 Version, and I'll put a link to that in the show notes. But what I identified, Joel, is that it's these natural organic products that are driving sustainable sales across to every category, which I alluded to. But specifically what I learned is that when you take out that little sliver of organic or natural or plant-based or whatever it is, then most every category is flat or declining. I wish more brands, more retailers would adopt that.

So my biggest frustration is that you listen to a lot of the quote unquote experts out there that are saying, "Price, price, price. Price, is the only thing that drives sales at shelf." If that were true, then luxury items and decadent items would not be growing in sales. Now you're in a ski town, so you understand that people are willing to pay a premium for a quality snow or a quality experience. Why wouldn't they pay a premium for quality food? And if you are what you eat, then what you eat matters. And to go a step further, if I eat the generic cheap stuff, I'm hungry almost immediately. I can eat a lot of it. But if I eat something that satiates me, it fills me up longer. And I can hit the slopes for a lot longer than I could have on the cheap stuff.

Joel: It's so true.

Dan: Yeah.

Joel: And you know what? I think about this a lot. So, I mean, when I was just, you know, getting out of college and super tight financially, it's like we go through, we have to do this, right? When our incomes are low we have to buy cheap things sometimes, right? And I remember thinking to myself often through the years like, "I can't afford the more expensive thing. I'm just gonna have to buy the cheap one even though I may have to buy it again some day."

And so like I talk about this a lot. I say this a lot. Buy it nice or buy it twice. Sometimes you can only afford to buy the cheap thing. But if you can afford to buy the better one... If you can, just pay a little more. You save yourself money in the long run. You don't have to buy it again. But I think it applies to food. Because I think if we're feeding ourselves junk, yeah, it may be cheaper in the beginning. But think about the effect that it has on our body.

Dan: Oh yeah.

Joel: And the health that we're ... You know, I think you pay a little more now and we're saving money down the road and we're healthier because we're not spending as much on healthcare and we're having a better lifestyle. I mean, I'm such a believer in eating better food. And yeah, you're gonna pay a little more for it. But consumers are finally starting to figure that out, too.

Dan: Exactly. And that's what's fueling this movement. I liken it to the ripple in the pond. We are the ripple in the pond. We're that intersection where good food, good quality healthy food is beginning to interact with the society, with the world. I had the same conversation with Gary Hirschberg where he said you need to vote with your dollars. Food is medicine. And that's the common theme throughout everything I've done.

You know, one of the points that I try to make all the time when I'm talking to mainstream brands is have you ever gotten a great deal or something that didn't work for you? Something that you didn't like? I mean, buying a cheap car that doesn't last several years or buying cheap clothes. I remember ... And this might sound kind of trite or kind of a little bit off-topic a little bit ... But I remember when you'd buy a pair of blue jeans and they'd last a couple of years. Or you'd buy socks and they'd last months and months and months. Now they're disposable. And so, yeah, I'm saving money. But at the same time, I'm throwing a lot of stuff away and then there's some repercussions there. But more importantly, you're right. And so I agree with you completely. Thank you for sharing that. That we are what we eat.

And we've heard that throughout our lives. And I love that way of looking at things. But again, if we are what we eat, then why are we putting garbage in our bodies? Aren't we worth a little bit more?

Joel: Yeah, it's totally true.

Dan: And as a side note, I bet that ... Well, actually you're here in Utah. So I don't want to overstep, but did you buy good beer at the time? Did you save money on Cheez Whiz or what was your money? So ...

Joel: I think it was ... I think, you know, one thing that I guess luckily my Mom taught me was to eat good food. So that was one thing that she brought us up on. And funny, the thing is we were really, really tight when I was growing up. We just didn't have a lot of disposable income. But my parents really did eat good food. And actually, it didn't always cost more because sometimes we were just ... Most of the time we were making things from scratch. It was just fresh ingredients, you know. Whole grains, thinks like that. And so that was one thing that she taught that, man, I am so grateful that she did.

Dan: Good, good. Well, and obviously it really helped you get that start and clearly I can see your passion. And again, Steven was going, "You gotta talk to this guy. 'Cause he's so passionate and enthusiastic about what he's doing." And for you to garner a 45, a 54 share, excuse me, at Target is phenomenal in a category that, like I said, I did a lot of work in. It was a tired, forgotten, neglected category. And honestly, I don't think retailers knew what to do with it. And the other thing is, a lot of retailers, some of your competitor products when they've started out in different stores, they end up in the baking aisle. Or they end up with the natural set. And my argument there is why would a retailer ever want to force their consumers, their shoppers, to go on a scavenger hunt to find the products that are gonna best meet their needs? So thanks for sharing that.

Joel: Yeah. It's true. And I think one thing that's been interesting for us is I think our experience was really more about reviving a dead category. You know, you were talking about that. And so that was our experience. You know, some people's experience is going into a high-growth category, right? And kind of jumping in there with something. But I think, you know, in a lot of ways you might look at that and go, "Hey, Joel, you don't want to go into a dead category. Buyers don't care about that. They're not gonna talk to you." I think there was truth to that for a while. A lot of times we struggled getting the buyers to talk to us because they were like, "Well, I'm not spending time on pancakes. I'm spending my time on cereal." Or, you know, some other category that's bigger.

But I think this speaks to the need to be really great at positioning. And I think that still gets understated or is under appreciated I think. So I think if your strategy is to go after a dead category, you know, obviously the worst thing to do is show up with a me-too product, 'cause, you know, that's death knell number one. But, I think that a great, great positioning has a chance. And if you find a buyer who really does care about growing a category, then they'll give you a shot. They'll at least talk to you and try to understand how you're going to revive or bring incremental growth back to that category.

And I think even we when we first started under appreciated that. And I think as we went along and saw that it was the protein SKUs with whole grains ... That our Power Cakes, that's what really started to grow exponentially. That helped us to realize, "Wow, we really do need to have something unique and different." And it's gotta be good enough to bring new consumers segments back into these categories. And so I think that's been, you know, a lot of learning bit that we took on.

Dan: Well, I'm glad you did. And to go one step further, one of the things that I talk about a lot on my content , et cetera, especially when I'm working with mainstream brands ... I've just finished, completing a webinar series for The Category Management Association. And organizations like FMI, Progressive Grocer, and others - they're reaching out to me to help understand this. The point is this, exactly what you said. Mainstream brands, when they innovate they slap a different label on, a different flavoring. That's not innovation. You are providing true innovation. So when you're looking at a category, it's not about well, "Buy my stuff because I'm the best or because I'm big or whatever." You're not talking at your customers. You're doing stuff. You're providing nutritional products that meet the needs of the consumers.

So the reason why I wanted to frame this is that one of the things I talk about in a lot of my content, my free course, this podcast, et cetera, is that if you focus on the shopping basket and work your way backwards ... And what I'm getting at, Joel, is this. You're customer's far more valuable to the retailer, especially for example the Target retailer. Because the customer that puts your product in their shopping basket adds value ... The ring for that customer's much higher than a customer that puts the cheap stuff in their basket. So my point is this: it's not so much the fact that you've got a red box, a blue box, a brown box, whatever on a shelf. It's what is the consumer buying when they buy your product? More importantly, think about all the things that they're doing. All the other interaction they have with the store.

And so, for example ... I'm just making this up. But I'd be willing to bet money on this ... That your consumer's buying a healthier pancake syrup. They're probably buying organic milk or something a lot healthier, something plant-based. Super premium products across other categories. Long story short, your customer therefore is far more valuable. Now, to bring it home, if a retailer can do an effective job at catering to and supporting your customer, helping your customer meet their needs and in their store without inviting them to go somewhere else, that's the Holy Grail. That's the one for the retailer.

And so what I'm trying to do is teach brands like you how to leverage that conversation with retailers. Because that makes you far more valuable than being an ATM machine in the eyes of, unfortunately, some retailers. Your thoughts?

Joel: Yeah. I think one thing that we ... Yeah. I mean, I completely agree with you. It's totally true, though, that a consumer that picks up our product is gonna be a lot more likely to be buying organic this or, you know, pure maple syrup rather than imitation maple syrup. And that they care about it. And so I think the other thing that retailers are hoping for out of brands like ours is, "How do we get those consumers to start to trade up? And then, how do we get them to start to have a great experience with the product like ours? And then, move on to those other products?" Right?

So one thing that we started to do was we started to think through our promotion strategy, our trade strategy at retail, right? In the early days, it was just, "Okay, give 50 cents off and that's our trade strategy." And yeah, okay, that works a little bit, right? You might get a few more people to try it because you just have a slightly better price. But we really started to learn not only that it wasn't about price so much. In fact, you know, what you and I were already talking about. In fact, just we learned that a 50 cent off discount was just as effective for us as a dollar off discount, by the way.

Dan: Good point.

Joel: And ... Yeah. Then we actually did some data on that or some research on it and we learned that, which is great. But what we really started to do, Dan, was to start doing more cross-promoting. So started to look at some of these other products that are similar. Like you were talking about other healthier options. Yeah, they may cost a little bit more, but they're premium products.

We started to cross-promote with those guys, "Buy a super premium yogurt and get a free Kodiak Cakes. Or, "Get a dollar off Kodiak Cakes." Or something like that. And we did it with bananas and we've done it with peanut butters and other really great products. That's where we really started to figure out more effective promotions. And you're right. And that's how I think we have brought some added value to the retailers to help bring more people into products like ours.

Dan: Well, and I'm glad you said that. In fact, those are some great examples. One of the things that I think a lot of brands overlook or really don't understand when you're first starting out, you're talking about venture capitalists and putting money in the category. It costs a lot of money to play in this arena as you well know. And to your point, a lot of venture capitalists, a lot of companies don't really understand this.

Now, I believe that food is the next big thing similar to the big IT wave that we had several years ago. And where I'm going with this is that food matters. And people are starting to pay attention to the kind of food that they put on their plate. So let me boil this down a little bit. I'm glad you pointed out and you identified that spending less money on trade promotions is actually equal to spending ... Its actually more beneficial to you than spending more money on trade promotions. Trade promoting, trade management is the number one line item on every brand's balance sheet. And yet it is the single biggest waste of money. The estimates are 70 to 90% of all trade dollars are wasted.

That's a pretty harsh statement. Here's what I mean. The purpose of a trade promotion is not to reward an existing customer. There are better ways to do that. The purpose of a promotion is to get new consumers to try your product. Consumer trials. And so to your point, if you have a strategy that leverages your consumer with another consumer to drive sales at shelf, that's the win. And going back to what you were saying, and thank you again for bringing this up as well, is that when you're focused on category growth, true category growth, the only way you can do that is by selling premium and super premium products. Not by selling more private labels. Yeah, that's a higher margin to the retailer, but at the end of the day, that's not how you drive sustainable growth.

And so when you start mixing some of these different categories, that's how you develop this. Now, one of the things I wanted to point out is social media. That's the single greatest opportunity for you to influence the consumers that might go into your store and buy the product, go into the retailer store and buy your product. Go searching for it. And that's an underused, utilized strategy. Big brands spend most of their time like we're talking about, talking at the consumer, "We're number one. We're best. You need to buy our stuff because we're a big brand." Whereas you're having a one-on-one relationship with your consumer. And your consumers are real fans. Like I said, my wife now uses Kodiak Cakes to make other products like breads and snacks and desserts and stuff like that, which are so cool. That's not what you intended with it.

But the point is, now she's a big evangelist. And she's sharing those learnings with other people. And so where we're really going with this is that the selling never stops. A lot of the big brands think that once you get the product in the back door of the store, you're finished. All done. Go home. Reality is that the selling doesn't stop because as we bring the products into our homes, we share them with our friends and our families. And we talk about the experience, the relationship with food, and how that food better meets our needs. Then that encourages them to go buy their products, tell their friends about it. Oh, and by the way, consumers buy things very differently today. They look beyond the four corners of their package.

And so all the things that you're touching on, these are the strategies that brands like you need to take to the retailer so that you can help educate the retailer on why you matter more to the retailer than your traditional mainstream brands.

Joel: Yeah. These are great points Dan. And I loved what you talked about with trade and I remember at one point thinking, "What if we did zero trade spend? And we put all of our money into social media or those types of things?" I mean, who knows what that would be like. But there is a little bit of a game that we have to play sometimes. And I think what's interesting is I think like as we ... 'Cause I mean, our experience on social media, for example, has just been incredible. And I think that has been one of the greatest tools that we've had to help us build a brand and to build a following.

And so I think to your point, it's like, "How do we talk to our consumers?" And I guess it's not through trade, but it's through social media and the other ways that we really stay engaged and connected with them. But that's been an awesome tool and we've continued to put more and more effort into learning at becoming better at it. And it has paid off big time. And I think it's also ... Today, you're right. 'Cause people are buying ... They're buying differently. They're buying groceries differently. They're buying different products.

But it's so community-oriented. There's so many different communities out there on social media that talk to each other and market for you. And so you're right, it's like ... Those are the real, the good buyers. Now are really wondering, "Okay, what are you guys doing on social media? What are you guys doing even outside of the store? And what are you doing outside of throwing me dollars for trade?"

And the good buyers really see that and appreciate that. And I think some of the old school buyers may not as much, and it's still all about, "Okay, what's your trade plan for me? What are you spending here?" And that's a little bit more short-term thinking than how good is your social media? How strong is your consumer following? You know, how strong are they? And look at that, you know?

Dan: Exactly.

Joel: And so brands like ours really have to spend a lot of time and effort on that. And, you know having a great influencer strategy. And I think, gosh, we're seeing so many great results out of that for us and for our brand.

Dan: Good for you. Well, that's exactly why I built that free course. And so one of the things that I'm trying to do is teach brands like yours on how to become an expert in your brand. How to become an expert in your customer. And what I mean by that is, who shops the category? How do they buy? What do they buy? Where do they live? What do they look like? Ethnicity, background, college, whatever it is. And then being able to understand your competitor.

And then take that information into the retailer and help educate the retailer on why your product's different. Because the reality is, the harsh reality is, that savvy retailers already know how your product's doing on their shelves. They don't need another report saying, "Look, I'm number one in the category. Number five or whatever and I'm up." That doesn't do anything to move the needle.

It's providing those insights and kind of what you talked about. Unfortunately, a lot of the category buyers at retail are incented on how much money they bring in. "Can you get X brand to spend X amount of money on a promotion even though you know that it's not gonna move the needle? And one of my biggest frustrations is distributors they'll call 'em out on this. The reason there are so many distributors in mainstream is because of some of these practices.

And so I would put money into a promotion. I wanted plenty of line of sight to what was being sold or even if that retailer had the item in their store. And so as a brand, how do I know I'm getting my bang for my buck? And so the Distribution Tracker that I built for SPINS, that's exactly the origin of that tool is being able to have a design to be able to show brands what's really going on at shelf at retail. So they can identify what they're getting in terms of their bang for their buck.

One of the things that you talked about is, you know, social media and trade spending. And so to go one step further, being able to leverage these strategies and help you stand out with the retailer as a category leader. Let me explain. A category leader is any brand willing and able to step up and help the retailer drive sales in their category. It's not a category captain, that's something different. Been there, done that. Very expensive. Don't recommend it for a brand like you necessarily. But as a category leader, you can help influence the retailer, help the retailer drive sales in their category by helping to influence the retailer as far as what are the best strategies to follow? Why would we want the Kodiak customer versus your competition? Versus a mainstream competitor? And then how does that consumer shop the store?

And remember, the goal is to help the retailer make a little bit of money, a reasonable profit, drive foot traffic in the store, and more importantly, help the retailer sell all their products. Help their consumers find all the products that they want while they're in their store. And not invite them to go shop their competition. At the end of the day, that's your goal. That's your purpose. Your reason for being.

Joel: Totally. I think another thing just to add to that a little bit is that I think one thing that we've really tried to do is ... Because, like, old school buyers or many ... You know, it doesn't matter. Old school, new school, whatever. There are mentalities out there that we are always trying to overcome or help people to see through or see around, you know? Back to kind of the trade promotion theme that you said where so much of the dollars you spend may be completely ineffective. But that's how they are programmed and they have incentives to get that, those dollars.

But how do we help them to see a different way? And I think one that's helped for us, that's worked quite well is just really trying to leverage their social media. So the things that are working for us is like, "How do we bring that to them?" And one thing that I think has been helpful is just content that we're creating. And so like if we can create a really great content engine, which is what we need to run great social media, if we can bring that to them, then that's helpful and we are still adding some value. We're still giving 'em something, right? 'Cause they kind of want something out of us.

So if we can give 'em that, then we've found that we've got a lot of free placements even on their social media, on retailers' social media platforms, where we really didn't have to pay. So we're trying to get them to think outside ... And I have these five things. These are the programs we want you to run, right?

Dan: Right.

Joel: And, you know, we might dabble in those a little bit or sometimes it's a decent amount because we just need to or we feel like we should. That's what they want and that's how we play their game. But if we can get some other things out of that that we don't have to pay for, then it becomes even more effective for us. And I think the social media part has been awesome. And so providing some content for them has been something that they've really loved that we've given 'em.

Dan: Oh yeah. I mean, you think about it, you're providing a reason for consumers to go to their website to learn more and to share more. I will share a quick story. It's a little bit off-topic, but it'll paint a really good picture. I heard the story many, many years ago. I'm gonna date myself. I think it was Paul Harvey said that he was at his son's house for Thanksgiving dinner. His wife was cutting ends off the ham and he asked, "Why do you do that?" And she said, "I don't know. Because my Mom always did that." So then they asked the Mom, "Why do you always do that?" And she said, "Well, my pan was too small." Get it? The point is this: we do what we do because this is the way we've always done it.

And where I'm going with that is that a lot of the mainstream retailers unfortunately do things the way they've always done it. A lot of us get blinders on and don't think out of the box.

Joel: Mm-hmm (affirmative). Yeah. It's true.

Dan: To provide content helps extend your brand messaging beyond the four corners of your package. And I love the idea that you're doing that because now you're providing free content to the retailer. So now the retailer can say, "Well, Kodiak Cakes has a dessert item? Cool." Or has a bread or has a whatever. And you're creating a new way to use that product. That ... Again, you're extending that conversation beyond the shelf and helping consumers. Especially millennials today that are very digital savvy. Help them understand different unique ways to be able to use that product, consume their product, and share it with their friends.

Joel: Yeah. Yeah, totally. I love that. That's a great story. And you know, one thing, we talk about that. Just even internally, just the need to innovate. And I'm gonna start using that story, Dan. Hope it's alright.

Dan: No, go ahead.

Joel: One thing that I do say to people all the time when they come in the doors here at Kodiak Cakes is I say to them "Look, I don't care how old you are. I don't care how experienced or inexperienced you are." I say, "We will not be the company where someone says, 'Why do you do it this way?' Well, just 'cause that's the way we've always done it.'" We're not gonna do that. And I think if we can build like that innovative mindset into everything that we do, then I think that we can continue ... We can actually be innovative as a business and continue to innovate in our products. But not only that, but it it's in our approach. How are we approaching the sales process? How are we approaching our marketing? And, you know, all companies need to do it, but that's sure as heck what you expect out of little entrepreneurial businesses- to be different and innovative. And that's how you win.

Dan: Exactly. We'll go back to that ripple in the pond. When we're talking about your products starting up and beginning to get out the word and getting that traction long before you become a tsunami and end up on a big retailer's shelf, that's where we need to begin those conversations. I've built my entire career on pushing big brands around by thinking out of the box. By not being siloed in the way I do things. By being able to come up with strategies and this is what I'm teaching in the podcast, et cetera, is teaching brands like you these strategies that are gonna help you get your product on more retailer shelves and in the hands of more shoppers.

Because by doing that, by making our healthy way of live more accessible, we are gonna change the conversation. So one of the things that I'm very passionate about is improving packaging. Making it sustainable. By improving nutrition by making these healthy foods more affordable, more accessible. More affordable in the sense of supply and demand. If you have more product going out the door, it lowers the cost of being able to put the product in the box and thus, pass it on to the consumer. And those kinds of things.

So that's the purpose of this podcast. So thank you again for making time for me today. I really appreciate that.

Joel: Okay. That's great.

Dan: What other thoughts do you have around what we've been sharing that you'd like to mention? Let's talk about your mission.

Joel: Sure. Yeah, so our mission at Kodiak Cakes is to inspire healthier eating and active lifestyles. Really, that's the mission. And we say that with products for today's frontier. And so, you know, as we thought about that, it's like the whole time since we started this, one of the biggest things that we wanted to do ... Yes, we wanted to sell healthier product, but why? Well, the reason why is because we wanted people to eat better. We wanted people to feel better. And when you eat better, like you said, you are what you eat. And so I love that. And, you know, being up here in Park City, Utah, we're in an outdoor active lifestyle place, you know?

And so, just even here at Kodiak Cakes, we have a bunch of mountain bikes and we've got skiing down the road. And we've got trails just a block away. And so people are always outside during lunch or early before work or after work, going climbing or going mountain biking. It's just become a big part of our culture. And so what we want to do is - how do we really leverage that? And it's like, we can be inspiring. And that's something to work for. And how do we inspire others to eat healthier and live active? And I get super passionate about that. Like, I just think that's one of the ... You know, that's something that we can do. And that's something good that we can do as a brand. And so I think that's a lot of fun.

Dan: Well, I think instead of shouting it from the mountaintop, these little wins, these little changes, I agree. Colorado and Utah are very similar in the sense that we have a very similar population in that we're very outdoors-driven. I used to do a lot of hiking, a lot of camping. I do a lot of mountain bike riding, et cetera, still. But I used to love taking pancakes with me. But I hated the fact that I'd be mountain biking or hiking or trail riding or something like that, I'd eat pancakes in the morning, and then I'd run out of fuel essentially midday. And I would need something else. So I'd put eggs in 'em. But I was always trying to find some other way to do to make it better. This is before we had all the protein powders and stuff like that.

So if I had this product back then, you know I would have been your biggest fan. 'Cause it does make a difference in terms of the way consumers do things. And I used to go on huge bike rides and trail rides and stuff like that. And having something like that that would nourish me longer would have been something I would have definitely gravitated toward.

Joel: Yeah, that's cool.

Dan: So thanks.

Joel: You got it.

Dan: Do you have any questions of me? Any things I could offer, support you with in terms of ideas? Or do you have any questions about strategy that I might be able to help you with before we finish up?

Joel: Yeah, I mean, that's a great question. One thing that I was kind of interested in was what you said just now, like how you're passionate about, you know, getting healthy products to be affordable and to be available to the masses. And I totally agree with that. I think what's kind of interesting is like as we see more fragmentation in smaller food brands popping up and selling really great products, I think ... What I'm interested in is ... Because when something's small you don't have a lot of scale, and that just your costs may be higher. And so that you may have a higher retail price for consumers.

But over time, it's like how do we consolidate some savings? I don't know if there's a way to do that. But maybe as multiple brands, as lots and lots of small brands get started selling products, you know, how do we leverage cost? How do we get affordable prices before we get to scale? You know?

Dan: Sure.

Joel: And I don't know exactly how to do that, but maybe that is through using, you know, co-packers like lots of small brands using the same ... You know, using bigger co-packers as they get bigger. But I don't know. I think that's just fascinating to me is how can we get the small brands, how can we get their cost structures better over time? And I don't the answer to that, but it's just something interesting to me.

Dan: Well, how about this? Going back to the fact that Steven is an investor in your company and maybe will help create a bunch of other organizations, if you can find ways to co-promote and leverage the strengths of those brands, that's perhaps the easiest way to do that. And so what I'm getting at is, buy Kodiak Cakes. Have free range eggs and drink grass-fed milk and grass-fed yogurt. And by doing that and by being able to stretch your promotional dollars, your trade dollars, would be a huge win.

And the other thing is, by developing those relationships with the other brands ... I mean, one thing that's really cool in this industry is that we're willing as a group to work with, mentor, and help support other brands even though there might be competitors. And so by being able to develop those kind of relationships with perhaps some different brands, complimentary brands, et cetera, that gives you more runway. And so again, your largest line item on your balance sheet or ... Excuse me, on your income statement ... You can tell I was an Accounting Major, right?

Joel: Yeah, yeah.

Dan: On your income statement is trade management.

Joel: Exactly.

Dan: And if you can lower that and get more runway out of the dollars that you currently have, this is a big focus of what I'm doing and why I do it ... If you can get more runway for the dollars that you have, then that's the first thing you can do to make a dramatic impact in your bottom line. And then be able to give back and promote that-

Joel: I like that.

Dan: And support that. But as far as the ingredient part, that comes over time as you improve your buying power.

Joel: It makes sense, but I like where you went with that. Because I think ... I mean, you're right. That's where we have control. And the other thing that I would ... Maybe you have some more insights on this is, back to that discussion that you and I were having before just a little bit about how the buyers' mentalities are, that they really want the trade spending. They want the trade promotion. And so maybe you might even have more insights on how do you get the buyers to think differently and how do we get them to not demand so much from us in terms of a trade spend so that we cut those costs down and utilize things like social media and other more grassroots efforts that are cheaper but also more effective?

Dan: Well, okay. Here's the answer to this. This is why I built the free course, right? Turnkey Sales Story Strategies. It's exactly why I did this. Podcast Episode 68, I tell you the origin story behind it. By the way, let me make a quick segue, something that you said I just thought about it reading my notes. Several years ago when I was basically on the selling side of the business, I convinced a retailer in town to give me end cap space because the brand that I was competing against, the national brand, was trying to push me off the shelf. They were trying to get rid of me. So I convinced the retailer to give me end cap space in every one of their stores, in certain stores.

I grew my sales so much more, dramatically more, by having that featured end cap on a regular basis that would trade out. My point is this. Trade spending is the best way to grow sales if you do it effectively. And the reason I wanted to highlight and kind of throw that back into our conversation earlier is because if you can come up with this creative way to really drive sales, that's gonna differentiate your shelf. So what that did is that put me in a position where now all of a sudden I'm equal with or on par with that national brand.

And so where I'm going with these strategies is if you can leverage these strategies to help the retailer drive sales in their store ... Remember, all they really want at the end of the day is more shoppers, little bit of profit, and they don't want to invite their customers to go shop their competition. So if you can leverage that, that's far more important than any amount of money that you can spend on a program that isn't gonna ultimately support you or provide the value that you want.

So we're trying to re-educate the retailer on how you are more valuable to them than your mainstream brand, than some of the other brands out there. And the reality is that some mainstream brands don't pay slotting. They don't pay for some of these ridiculous fees. As a category captain, we kind of reference that a little bit. I was able to leverage my relationship with some retailers because I provided so much value that I did that in trade for trade spending. And so if you can leverage your capacity to become a category leader for the retailer, then that helps that relationship with that specific retailer. And again, if they had a choice between a couple thousand dollars for a promotion that may or may not move the needle and you driving in a customer that's gonna come back time after time after time to buy Kodiak Cakes and the other items you promote with it, that's far more valuable.

And remember ... And this is something we really need to rethink and I'm trying to re-educate people about this. Retailers generically don't make anything. They sell real estate in the form of the space that your product occupies on their shelf. That real estate, the way that they make money on that is by increasing the turns. By increasing the shoppers that come into the store. And by increasing the profit, the little bit of margin in each category. More importantly, if they focus on the basket, shopping basket, what's in the shopping basket as a consumer checks out of the store and work backwards, that's where you come into this, that's how you're ultimately gonna become a category leader. And you're gonna provide the most value to that retailer.

Joel: Yeah. That's awesome. This is super helpful.

Dan: Good.

Joel: So I just have one more question for you-

Dan: Sure.

Joel: That really it's just related to this. Which is, you know, you talked before about kind of some research that you guys did on ... Or that you did on, you know, the effectiveness of trade spend and how a lot of the trade spend really isn't effective. Do you talk about that anywhere in more detail-

Dan: A lot.

Joel: Like on one of your podcasts or ... Where can I find some more of that where you're talking about that?

Dan: Oh, you've caught me off guard. I don't know the exact episodes. I don't have my sheet in front of me. But yes, I do. To answer your question, yes I do. I am constantly putting out resources. I've got about 300 plus articles printed globally and literally in every trade publication out there. I'm in the process of getting ready to launch a YouTube channel. I'm gonna start launching mini courses that are gonna dig deep into this. I've got some tools and tips and stuff like that I'm gonna be teaching brands like you on how to do this stuff. I'm actually building-

Joel: Exciting.

Dan: A big course down the road. I've got a book. I'm focused on this.

Joel: This is one of your biggest focuses, right? This area?

Dan: It is. It is.

Joel: Okay. This is huge, 'cause you're right. This is one of the biggest ... Probably our biggest line item.

Dan: It is.

Joel: And it's like, wow. I mean, I think this conversation has also been pretty eye-opening for me. It's like to even hear validation from you, who's done a lot of research and know a lot about this, you know, we really do need to focus on this and figure out better ways to spend our money and help the retailers to shift their minds a little bit. And focusing on what you said, which is about, you know, how do we make a profit? How do we retain our shoppers and build market share? Not just focus on the trade spending.

Dan: Exactly. Well, I mean, it's all important. And it's all about strategy, strategy, strategy. And that's what I'm trying to help brands like you with. And so let me back up a little bit, kind of frame this. I carried a bag for Unilever. I worked as a District Sales Manager for and actually drove a DSD truck, et cetera, for Red Seal Borden and was also category captain, category manager for Kimberly Clark. So a lot of traditional background in this space. I understand it very, very well. I actually built tools that some of those brands are still using today that got down to the contribution of a promotion by a brand at a specific retailer. Which is pretty phenomenal.

I was able to develop tools that helped allocate how much product you need to have to go into each store. These are things I'm gonna be teaching later. But where I'm going with this is that when I started out kind of similar to the way that things are done in natural, it was all about, how do I convince a retailer to buy a truckload of dish detergent or something like that from me and not think about what did it actually cost the brand? Or what did that contribute to the brand's growth? One. Two, also coming up with ways or strategies to figure out, how do I reduce the amount of deductions that don't make sense? How do I manage that piece of the business? Three, how do I understand which promotions move the needle? Four, how do I provide or produce a promotion that actually meets or hits or exceeds a really reasonable or ROI? And then five, how do I leverage all of those strategies within a brand to help teach the brand how to maximize their trade spending?

So I know that's a big, long definition, but long story short, these are the things that I talk about in a lot of my content. This is gonna be the subject of a lot of future mini courses, big courses, et cetera. Again, teaching you how to take what you've got today and get more runway out of it. At the end of the day, that's the goal.

Joel: Super exciting. And I think, you know, brands like ours, we need some leverage, too, when walking into these grocery stores. It's like, if we have some data points on, "Hey, here's how ineffective these things can be. There's been some research done on this." And that sort of helps to start changing the conversation a little bit, too. So next time you can dive into that a little bit more, too.

Dan: Well, you know, one of my first mini courses I'm actually gonna be talking about this. And here's something that you might want to consider. I talked about it in the free course - how you need to know your consumer. And so as a big brand, we're taught, okay, female head of household. 29 to 32. College-educated. 2.5 kids. That's it. I'm talking about you need to know that and beyond that, do they go to yoga? Who are their friends? What social media platforms are they on? How do they shop? How do they buy? How do they eat? Are they vegan? Knowing these things about 'em. And then how do they share their experience, how do they communicate? Or how do they talk to their audience?

And then as you begin to leverage that knowledge, as you begin to understand and become an expert in who your customer is, how your customer shops, that, Joel, helps you stand out at shelf with the retailer. And then all of a sudden, the retailer sees you as a value-added brand as opposed to another brand saying, "I need you to put my product on the shelf in this location and whatever and promote it. And here's the money." That kind of thing. So the point is that giving you the resources to re-educate brands so that the brands can help re-educate retailers so that they're not so worried about their competition, the online threats, et cetera.

Joel: That's great. I love that. That's cool.

Dan: Trying to make a difference.

Joel: Yeah.

Dan: Well, I appreciate your help and your time. Thanks.

Joel: No, likewise. This is cool.

Dan: Anything else you want to share?

Joel: No, no. I think this is a lot of fun. And I think this is just a heck of a fun industry to be in, I'll just say that.

Dan: Oh, it is. Yeah, it is. It's fun to bump into people like you at trade shows and now to talk to you on the podcast. And to get to know you and better understand your brand. And to be able to share your insights with other brands. 'Cause going back to what you said, it's inspirational. This is how we rise the tide and how we help others. So thank you again for your time.

Joel: Yeah. Absolutely. You got it. Thanks for having me.

Dan: Thanks.

I want to thank Joel for coming on today and for sharing his story, his wisdom, and his insights. I'll be certain to put a link to Kodiak Cakes on this podcast webpage and in the show notes. You can get them by going to brandsecretsandstrategies.com/session75. Today's free download is my Eight Strategies to Maximize Trade Marketing ROI. It's a free guide to help you down this journey. Help you understand some of the pitfalls and challenges that brands have. And better yet, how you can navigate around them to maximize your trade marketing ROI, get more return out of your investment, and grow your brand.

As always, I appreciate you and I thank you for listening. I look forward to seeing you in the next show.

Kodiak Cakes https://kodiakcakes.com

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