In this episode, we’re joined by Marc Siden, Co-founder and CEO of Cloud Water.
Marc talks about the challenges of leading his company through the last year of COVID and how they’ve been able to thrive to become stronger through these unprecedented challenges.
Additionally, he shares the difficulties and opportunities in the beverage space, specifically on how to compete against established giants like Coca-Cola.
Lastly, Marc shares the importance of understanding your landed costs, distributor margins, retailer margins, shipping and promotional costs, and why this is absolutely vital to your success as a physical products company.
Listen on Apple Podcasts here or Spotify here.
Transcript
Ken: Welcome to the Physical Product Movement, a podcast by Fiddle, we share stories of the world’s most ambitious and exciting physical product brands to help you capitalize on the monumental change in how, why and where consumers buy. I’m your host, Ken Ojuka.
I talked with Marc Siden, Co-Founder and CEO of Cloud Water. Cloud Water is a leading functional all natural CBD beverage brand. Marc talks about the challenges of leading this company through the last year of COVID and how they’ve been able to thrive and become stronger through these unprecedented challenges.
Marc spent some time explaining the difficulties and opportunities in the beverage space and how to compete against established giants. Like Coca-Cola. Lastly, he talks about the importance of understanding your landed costs, distributor margins, retailer margins, and shipping and promotional costs and why this is absolutely vital to your success as a physical products company.
This is a jam packed interview that you won’t want to miss. Enjoy!
All right. Hey Marc. Welcome. Thanks for joining me. Appreciate it.
Marc: Thank you for having me. It’s, uh, you know, delightful to be here and always appreciate an opportunity, uh, you know, to chat.
Ken: Yeah. Yeah. Cool. Um, where are you calling us from?
Marc: I am in New York city, New York, uh, sunny, 80 degrees.
And, uh, life is returning to as normal as, uh, composite as possible in New York city has this pulse and energy that, you know, New Yorkers, you know, kind of. No get hold of and sorely miss when it wasn’t there, but it certainly back. And, uh, and just speaking to fellow New Yorkers, there’s this kind of euphoric sense of relief and feeling that, Hey, this, the energy of the city is back.
Uh, you know, there’s some things to work on here, uh, as always, but it’s really great to see life returning to normal. I wish that, uh, you know, everybody, you know, no matter who’s listening and where they are, it’s so important for all of us.
Ken: Yeah. Yeah. And I absolutely, I love New York, um, especially in the, in the springtime.
Um, spent some time out there. Um, I think it’s beautiful. There’s always this energy. Um, especially, especially in the spring, it just seems like you’re coming out of winter and, uh, you know, it’s just very optimistic and fun and, and, uh, I think especially now coming out of COVID, um, you’re probably feeling that.
Marc: Well, I was going to say COVID was a very, very, very long winter. So very apropos that were kind of coming out in spring, which is usually the exact way you described it. Uh, just took a, you know, a few extra seasons, if you will, to get us, you know, is one full cycle from spring to spring to get us back here.
But, uh, yeah, it feels great.
Ken: Well, great. Um, well, um, your, your company is cloud water, um, cloud water brands. Um, why don’t you tell us just a little bit about it and, um, um, what, what makes you guys unique in the market?
Marc: Sure. Uh, so cloud would a brand has, uh, you know, two lines of, uh, functional, uh, beverages.
One is our, our hamper CBD line, uh, that, uh, comes in for artisanal, uh, flavors, uh, grapefruit mitten, Bazell blood orange, coconut, Blackberry lemon, and Rosemary, and our Aztec chocolate and strawberry. And that was, uh, you know, our launch off point for the brand. Uh, and. About May, 2019. And, uh, I, you know, I don’t come from a, a beverage background.
Uh, and I was, I don’t want to say I was forced into this, but it, it kind of fell into my lap. So, you know, as I talk about the brand and the people and you know, those around us, it really has little to do with me and more to do with these incredible people. Uh, that I get to, I say, go to war with every day.
Uh, but you know, when we sat around and, you know, decided that we wanted to launch a CBD beverage, you know, the first couple of things we, we looked at was, you know, we’re going to be launching into a very crowded space. And, you know, we were one of the first movers, but one of the things that we. Um, can do, you know, to make us unique as you ask rise above the noise, as we say, and not pound our chest and say, Hey, we’re better.
And Hey, look at us is what can we do that will resonate? And, you know, really, you know, capture and captivate, uh, you know, the audience that we want to reach. And so there were a few attributes or characteristics that we really honed in on and the first was, uh, you know, kind of our branding. Uh, you know, we didn’t spend a lot of money with branding agencies.
Although we did go through a process of nomenclature and cloud water kind of happened by accident. It’s a long story. I won’t get into it, but we loved the name and we wanted to create packaging. That would really stick out and kind of a, Wishek some sense senses and people, as they look at it, uh, to say, Hey, what’s that?
And, you know, next, uh, was, you know, really a simple, simple ingredient panel, uh, that would make up our flavor profiles. Uh, we happen to have six. Ingredients, you can pronounce them all. And they’re all either all natural or organic and they’re good for you. And then the most important thing is obviously taste and, you know, in functionality and wellness, there’s been kind of a, you know, a large sacrifice, at least in my humble opinion, uh, for that functionality when it comes to taste and we’ve always operated under this ethos that whatsoever.
Our customers have their cake and eat it too, you know, let’s make it really good for you. Efficacious drinks, uh, that look great in case. Great. And so it took us some time and we went a little slower, uh, but you know, we launched, uh, that line and those flavors, uh, and, uh, you know, to, to, to our surprise, although we were, you know, aspirational, uh, we were, we were nominated, you know, right out of the gate for best new beverage by net and made it to the finals, which, you know, really helped us.
Kind of get on the map, right? Yeah. Yeah. So that, you know, that, that was, uh, that was very exciting. And, you know, we, you know, we don’t our, our social communities and our networks, you know, brick by brick. Uh, and because that’s a feedback loop for us because we want to hear what are we doing well, and most importantly, what are we not doing well, where can we Excel?
And we’ve done a lot of tweaks, uh, you know, to. Either the packaging or some flavor formulas or whatever, uh, you know, based on really listening to our consumers. And I cannot underscore how important that is for a small brand that has, you know, large aspiration is if you’re not listening, you’re not going to get there.
Well, you might, but I think, you know, in general terms, you know, it’s, it’s really good to listen.
Ken: Yeah. Yeah, that makes sense. Well, let’s, let’s double click on a couple, a couple of those things, you know, first of all, you know, you said you don’t have a beverage background. I want to hear a little bit more about your, your career, your background, and kind of where you’re coming from.
Um, and then you mentioned also that you kind of fell into this and it kind of fell in your lap. Uh, kind of want to hear a little bit about that.
Marc: Sure. Uh, well, you know, I’m a poker player, uh, in my leisure time and any poker players out there know that, uh, there’s some skill to it, but you certainly need a lot of luck.
So I love saying I’d rather be lucky than good. Uh, and you know, I, I was running a real estate, uh, information and technology business, uh, that, uh, I had started in my basement with a, uh, a partner. About 15 years back
Ken: and we’re onboard informatics, is that
Marc: the data is correct? Yeah, basically we aggregated data on every neighborhood in the country and we sold it to companies like Zillow and Coldwell banker.
And any data that you would see out there around a listing. Uh, was, you know, what my company provided and pioneered, you know, on the internet and, uh, you know, the, the great thing about that experience, although it took many more years than we saw it, doesn’t it always is that, uh, we, you know, it was a self-funded business.
So, uh, we really learn how to operate through extreme adversity, you know, two recessions, the financial crisis and so forth, and even a buyout offer that got taken away from us during that financial crisis. And so. Um, It really taught my partner and I, you know, the sayings and we made so many mistakes right away, but it really taught us, you know, how to operate, uh, and you know, what, what it really takes to build chops in a business, regardless of what industry you’re in.
And we were lucky enough to exit that business in. Uh, 2018 and it wasn’t retirement money, but it certainly felt good to get through that adversity and finish you get, I guess, this little for real badge that, Hey, you know, we exited a company, but, uh, you know, I made a conscious decision. And I was going to take a break.
Right? I mean, I grinded for 15 years. Let me, let me chill out for a little while. And just as I was kind of soaking into that lounge chair and, you know, relaxing, I get a knock on the door and it’s opportunity, right. And entrepreneurs, you know, who are out there, you know, you don’t ever say, come back later or you jump out of your chair and say, what do you got?
And it was my. You know, a good friend. And my now co-founder Barry Kellman and Barry, you know, said I was out on the west coast and I tried some CBD waters and they absolutely casted like crap. His sister, uh, happened to run a really reputable flavor house here on the east coast to Barry brought back some samples of CBD.
And Ellie whipped up some flavor profiles and Barry started to walk around and have people try it. And he got a really great response from it. Uh, so he, he then came to me and said, look, I think there’s something here. I really don’t know how to start and operate a business. Can you help me? And I said, sure.
And at that time I was just helping them out as a friend. So I made some introductions and said, Hey, go meet this person, that person, this person. And I got subsequently invited to kind of a third meeting between the group and he asked me to come and I said, sure, I’ll come. And I just listened as a cop and talked and you know, I was not.
I, it wasn’t paying attention, but some of it didn’t make sense to me because I knew nothing about beverage and I turned to bury at one point, the only thing I offered it to meeting was Barry. Just make sure you find a good CEO. And everybody in the room started looking at me. And I said, you guys looking at me for, and you know, one of the guys who’s now, you know, a, a founding advisor has to branch said, siding.
You’re the guy. And I’m like, w w how am I, the guy, I don’t know anything about beverage. He’s like, trust me, you’re the guy. So they leave Barry corners me, and he’s like, you’re my guy. I want you to be my co-founder and CEO. And I didn’t say yes right there, but to, you know, in the interest of time and your audiences boredom, uh, one thing led to another, and I finally accepted to come on and, you know, co-found the business and.
And be a CEO and you know, here we are a few years later and what a journey it’s been. Um, so let me, let me pause it. You know, I I’d be remiss if I didn’t, you know, talk about I’m no hero here. I didn’t think this up. And certainly I wouldn’t be here without the incredible people that are involved in cloud, but, you know, uh, that that’s kind of how it started and, you know, it’s always those happy accidents, right?
Ken: Yeah. Yeah. Um, I, especially like your point about, you know, when opportunity knocks you, you get up and answer that door, you know, um, no matter what you’re doing, it’s in your
Marc: blood. It’s, you know, if you’re a Marine and you come home and you’re here, your brothers are back, you know, in the war zone, you jump up and go.
I mean, it’s just, it’s in your blood. It’s an eight, you know, I can’t help it. And I know, I know a lot of entrepreneurs feel the same way.
Ken: Yeah. Yeah, for sure. Um, so you mentioned, um, functional beverage, you know, let’s just double click on that, on that term a little bit. What, what, what exactly does that mean?
Marc: Yeah. So, and that’s a really great question because, you know, we throw terms around like wellness and functional and, and what have you functional to me is, uh, you know, first and foremost, I mean, there’s, it’s, science-based, so it’s not a claim we put on the label, uh, that makes your brain think, Hey, I’m going to take this and, you know, Great things are gonna happen.
Uh, you know, it’s a, science-based, uh, you know, ingredient or ingredients that have an efficacious impact on, you know, your mind, your body, or, you know, I’ll even say, and when it comes to CBD, it’s something I took a course on and really studied it. Uh, you know, to come into this role, I was absolutely blown away by.
The medicinal properties. Uh, the fact that our body naturally metabolizes CBD because of how our central nervous system is set up. And first and foremost, how it was found to just, um, provide balance or homeostasis within your central nervous system. That, and that alone to me, it’s. Really functional, especially as a new Yorker where we’re, you know, we’re always walking around, we’re always in a rush.
Uh, you know, our RPMs are revving really high and here’s something that in the right doses taken, you know, in the right way can actually bring you to idle. You know, a lot of people talking about CBD is like, you know, chill out and yes, there’s a chill effect, but the chill effect is really just bringing your busy brain or your anxiety or whatever.
To a lower level where you can be more lucid and function. And to me, that’s functional. Right? And so I became very enamored with that. And you’ll see, as I talk about some of our other products and the things we’re going to do in the future, it really has to be something that’s science back. And it has to be efficacious.
Like it’s not yeah. 2% of a recommended daily allowance. So we could put a vitamin, you know, or an ingredient on our label. It has to do. For us, our bar is it has to contain something. That’s gonna have an impact, uh, on, on your wellness. Right. And so that’s kind of how we define it. You may see it differently.
That’s my kind of humble perspective, if you will.
Ken: No, that’s good explanation. Um, and then you, you’ve also launched, you know, a couple of other, um, product lines, um, and immunity, it looks like it’s one and then merge. Uh, do you mind explaining some of those.
Marc: Yeah, so, uh, which is the low-hanging fruit. Um, part of the great team I work with, uh, one of them happens to be my wife and she is a incredibly talented, uh, A fashion designer who, uh, you know, just hurting me up and away every day on the phone about cloud water and started to get involved.
And like so many other people, she was organically drawn to the brand and she started to take, you know, she designed our social. She actually. Yeah. He was instrumental in designing our packaging and so forth, and she just started making some cool wearables and, you know, we throw them up on social and the website and people went absolutely crazy for them.
I wouldn’t call it a major product line. And you know, we’re not really relying on that as revenue, but, you know, as. Many trying to build, you know, more of just the product line and more of a lifestyle brand or a brand that people, you know, have fun interacting with. Some of our wearables are pretty cool, you know, driven by our logo and, and things like that.
So that’s, that’s the low hanging fruit. Um, we launched cloud water plus immunity, uh, in the height of COVID. And again, these are some of these things that you don’t plan for, uh, where, you know, we had. Just starting to distribute our hemp line at any, any business savvy or not even savvy person would say, how in God’s name would you launch a second product when your first product is still trying to get out there?
And that’s a damn good question. Uh, you know, the headwinds we were facing as many were, were, you know, obviously with COVID and retail slowing down, but one of the biggest, uh, considerations we had to take into effect into account was that, uh, in the CBD space, we’re all waiting. For a, you know, a federally regulated, uh, framework from the FDA.
Uh, and as we know, they have been threatening to create a framework, uh, making it officially legal, uh, to put CBD into food and beverage and distributed. Uh, they have not done much of that at all. And with the advent of COVID and rightfully so. They were going to be busy doing what they were doing, leading the charge on therapeutics and obviously vaccines.
So as a startup, that’s burning money and you know, now inching along, uh, we, we had to do something, uh, you know, we, we launched a digital strategy, uh, you know, for the brand, which helped carry us for a while, but it wasn’t going to be enough. So, um, another incredible. A woman that I work with is Dr. Carol Dollard she’s our COO Carol, uh, was instrumental in building vitamin water.
She was vitamins, vitamin water COO, and she’s a PhD in biochemistry. And I called Carol. I said, look, we have to do something. Do you think people would drink cloud water? Uh, you know, without the CBD and we went back to a lot of their feedback and this is why a community is so important, what are your customers say without your brand?
And, you know, a lot of them would just call out, you know, the great taste. So let’s create a product with great taste, um, and let’s take the CBD out and let’s put something else in, right. You know, almost 30 seconds to come up with something that would be immune support. And, you know, as I said before, uh, you know, we wanted to use ingredients that would resonate, uh, that people could pronounce and understand, and that would be top of mind.
And we came up with vitamin D three and Vic. And so we launched within matter of 60 days, uh, you know, we took the same flavor profiles and our hemp line created some new packaging, a slim can versus the bottle. We augmented the, you know, the branding a little and we went to press and we launched that. Uh, and it’s actually done wonders for the brand.
It certainly complicates, you know, the landscape and it, it creates a little bit, you know, more chaos if you will, but it did open a national artery of distribution for us. Uh, because one of the issues with CBD is that the big distributors nationwide were not taking CBD products nor were. And still are some of the larger chain, natural chain, specifically like a sprouts or a whole foods.
So, um, you know, we, we now have an opportunity and work with some very large national distributors and are getting into. Change and independent markets all across the country, uh, because of this, you know, some people call it a pivot, it’s really an evolution or a line extension, uh, which we had planned for.
We just did it prematurely. And, uh, you know, it’s, it’s resonating very well. Uh, you know, with our core audience is also concerned with their immunity and immune support.
Ken: Yeah. Understood. I mean, just so, so we kind of have an idea, you know, w what, what percentage of your business, you know, would you say, you know, between the two main lines there?
Marc: Yeah. So, and that, uh, that’s a moving target. Uh, we launched the immunity, uh, you know, probably in December of last year. Um, so, uh, right now it’s about 50 50. Uh, we do expect this year, uh, that immunity will. You know, take the lead because, uh, you know, we’re getting into some chains and chains are 20, 30, 50, a couple hundred stores at a click.
And, you know, the order sizes start to go up and that velocity starts to go up. Um, but you know, the underlying strategy there is let’s get a cloud water product. On a shelf and let’s get the brand out there and, you know, CBD is our star. We’re not giving up on it. We are huge believers in the category.
And so we, we do anticipate a Slingshot effect if you will, uh, by getting placement in some of these chains, with our immunity product, once the FDA does come around and we certainly anticipate they will, we’ll go back to the chains and say, Hey, we have this other skew, this other line. And we can foresee, uh, you know, some pretty rapid growth, you know, in the, uh, in the hemp and the CBD line as well, which is growing every day as well.
Everything is growing right now. Thank goodness. But, uh, to answer your, you know, insightful question, uh, it’s 50 50 and, and, you know, that’s exactly where we want to be. That just means we’re doing more business out there. We’re reaching more customers and run and beat the crap out of each other. Quite frankly, because you know, my, my, you know, my daily grind is let’s just get this can with a cloud water product, into somebody’s hands.
And I say this humbly, but overwhelmingly in the 98 percentile people come back and, and are quite, um, I was going to say obsessed, but they’re quite intrigued and they’re very attracted to the, you know, the products that we produce and that’s great news for us. So it’s just a question of continuing to grind and drive trial and get our products out there.
Ken: Yeah, I think obsessed as a is a great word to use, actually, you know, you want people obsessed with your product, right?
I think this brings up a pretty good talking point. Um, You know, what, what advice would you give for anybody that’s entering? Um, let’s just say kind of a, um, entering a market where they, they might have an ingredient that’s more controversial or, you know, is more regulated. Um, kind of like, like CBD.
Um, what, what would you, you know, what, what kind of advice could you give to somebody and what would you maybe need to do different than in launching a different product?
Marc: Yeah. So a couple of things. I love your question by the way. No. If you don’t know the answer to one of, one of your prevailing questions or goals, then you have to account for, uh, you know, Just some curve balls.
Right. And, you know, I don’t want to use the word arrogance, but if you sit there and build a business on CBD, as we did and say, yeah, the FDA is going to approve it, their FDA is going to approve it. And then, you know, three months into launch, not only didn’t the FDA approve it, New York city bandit. Right.
And we’re like, whoa, what are we doing? So, um, you know, good. Good entrepreneurs are on their toes. And you know, they’re going to hopefully anticipate, uh, that if the landscape has not been framed out that they are going to run into delays and everything is going to take exponentially longer. So first and foremost, plan out financially, right?
Make sure that, you know, whatever runway you gave yourself at a multiple to that, because you’re going to need it. Number two is controversy means education. And you know what I was in a hotel one evening. I’ll never forget this. And I. Uh, held out a bottle proudly and I said, Hey, do you want to try my CBD drink?
And the person had a visceral reaction almost like I pulled out a knife. They’re like, what is that? Is that gonna get me high? Or, you know, no, I don’t smoke Cod or whatever. And you know, it punched me in the gut and, and I’m glad it happened. There is that, well, you know what. I may know about this. I might be in love with this.
I’m staring at the cereal box because there’s a lot of people out there that don’t really understand this compound yet. And so, you know, we immediately embarked on an educational process, stop the selling and start educating because the best sales folks are the sales engineers, right? They’re the ones educating the customer on the value that they’re getting or what they’re actually getting instead of a salesman, who’s trying to shove something down their throat.
So. Just make sure that, you know, you, you, you know, that it’s anonymous, but if there’s controversy, uh, there’s going to be a level of education and underestimating those things will, uh, greatly impact your forecast, your client to market your, go to market strategies and things and things like that. I think it’s wonderful to be disruptive, but you have to do it with your eyes wide open.
And, you know, wishing and hoping are not going to pay the bills. And certainly not going to invite, you know, other rounds of investors in which you haven’t. You know, been anticipatory about these issues. I hope that helps.
Ken: No, I think it definitely helps. Um, just kind of a follow up question on that, if, um, so if you’re launching into one of these, you know, more controversial markets, I’ve often heard people talk about, um, some of the advantages.
Uh, of it, you know, um, would you, uh, would you agree that there’s some advantages to entering a market like that? That’s, you know, in the news that’s, uh, you know, top of mind for a lot of people, um, you know, that can help actually propel your brand forward.
Marc: Yeah. And, and yeah. You know, I, I, he said, and I mean, it, I think disruption is beautiful and, and I think, I hope we’re, we’re saying the same thing.
I think launching into that controversial kind of, uh, you know, dynamic is a bit of disruption, right. Because if it wasn’t everybody, it would be ubiquitous or everybody would accept it, or it wouldn’t be on the news. Right. But you know, that doesn’t translate to, it might be top of mind. And a lot of people were seeing things about CBD, but they didn’t know what the heck it was.
And you know, when people say, is that going to show up on a drug test? Like it’s CBD. They’re like, well, what’s the difference? So they might’ve listened and heard it, but they didn’t really understand it to a level where they would take money out of their pocket or let alone put it in their body, even if it was free.
Right. So all I’m saying is yes. Launch into those headwinds, but launch into them with anticipation of the boxes. You’re going to need to check to get over those hurdles. Right. And take leap, thankfully for us. Uh, you know, we found that out very early and know we, of course we thought about it, but then again, you don’t know.
What the battle is going to be like until you fired that first bullet and me holding out that sample was like that first bullet of the battle and every battle in any war book you might ever read. You know, any battle plan changes. The minute that first bullet is shot, right? And so we huddled back up and said, okay, team, we have to do layers of education here.
People don’t know what the bleak this stuff is. I don’t care if it’s in every headline, they’re not going into the science. They don’t understand what it’s made of. It’s going to get them high. Does it show up on a drug test or whatever, and today, you know, that’s 1% of the questions we got. When we launched, it was 110% of the questions that we got.
So, um, I love that. I mean, I, you know, th that challenge, that disruption, that’s what gets us up in the morning and, you know, we’ll all take on a great challenge. My advice. You know, as you asked as simply just to have those eyes wider open, if not already that you know, what you’re getting yourself into, and those unanswered questions are, are either going to be your best friend.
If you hit them head on, or they’re going to come back and kill your brand. And that’s why we see some brands, you know, unfortunately go out because they did not anticipate some of those headwinds or they couldn’t withstand them. And that’s unfortunate because they might’ve had a great idea and a great product.
Ken: Understood. Um, let’s talk just a little bit more broader challenges with launching a beverage brand versus, you know, let’s say just another food brand. Um, what, what are some of the maybe logistical or, um, uh, yeah, I guess just unique challenges of, of being a beverage.
Marc: No ignorance is bliss. You know, when we launched our product, I’m like, wow, this looks great. It tastes great. Uh, you know, let’s just get it out there. And, uh, you know, talking about going into something with your eyes wide open, uh, anybody that’s been in CPG retail, uh, knows exactly what I’m talking about and if you’re not, um, it is one of the most difficult, uh, areas. Uh, to undertake, there are so many moving parts, uh, for just getting a bottle from your warehouse to the shelf, right.
And then getting it sold and making money on that. Uh there’s everybody has a handout. There are charges for everything. And not to mention that, I mean, it’s, it’s almost sort of a miracle to get your product on a shelf because it is so incredibly crowded out there. And very busy, you know, the days of the billion dollar brand are behind us.
And now you have a lot of brands like cloud water, uh, micro brands, newer brands, while we may be serving as innovators to some of the bigger companies, we’re not going anywhere in less, you know, we produce a good product. We make our margins, we get on shelf and most importantly, you have to sell it. Right.
It’s not, Hey, we got into stop and shop. Nobody buys it. It’s not a win. It’s the second and third and the fourth, you know, repeat, uh, know purchase. So how do you get on a shelf in a, you know, in a market that has 5,000 other products and let people know you’re there. So then you have to do in-store programming and in store promotions and digital.
I mean, it’s incredibly complicated. Uh, to, you know, get a brand out there, get it on shelf, uh, make your margins and, and sell it. Uh, and it’s obviously doable, but it, it it’s one of, one of the greatest undertakings I’ve taken on in my professional life. If I can. If I can distill it down, it’s pretty incredible.
And I’m not trying to dissuade anybody out there, but again, I’m just speaking from experience and somebody who came into this, you know, not knowing much of anything. And man, I’ve learned so much over the past two years. Um, and it’s one of the more difficult things to undertake for sure.
Ken: Yeah. Um, you know, chin margins, you know, and I think that’s something that, um, that a lot of people underestimate, um, uh, you know, how much they, they need to give up along the way.
Um, before that gets into a customer’s hands, maybe you could, uh, break down, you know, just some, some rough numbers or like hypothetical numbers. You know, if you, if you make a product. Um, you know, w what you can expect, uh, to sell it to the retailer for, um, and then just kind of looking at profit. Um, so, you know, like, like, uh, you know, what, what percentages, what, what kind of markups do you need to take into consideration?
You know, when, when you’re doing this?
Marc: Sure. Uh, you know, so first and foremost, you have to have your landed cost down to the penny, right? So from whatever vessel. To your entire supply side to, you know, raw goods, your ingredients, everything down to the penny. And it is a business of penny, right? Because that’s landed.
That means it is now, you know, has shrink wrap on it in your warehouse and it’s ready to go. Typically in retail, it’s going to go from that warehouse to a distributor distributors, work on anywhere from a 20 to a 40% gross margin. So you have to account for that. Uh, In doing that, you know, you set kind of an MSRP or an FRP for your product where, uh, Hey, this product should sell.
You know, a two 99, right? And knowing that and working backwards, you take your landed costs. You take your distributor, markup and retailers make anywhere from 25 to 40% as well. So, you know, you have to calculate. All of those markups along the way, um, you know, to get to your SRP. One of the things that we was a greatness step on our part when we launched is, you know, we want it to be a premium product.
Uh, we priced it way too high. Um, and the good news is, is that, you know, we, we had margin room, so it wasn’t a margin issue. It was just more of our ignorance or arrogance or whatever you want to call it. Uh, but the, the, the real Tetris cam where we, you know, we came back down to earth and said, okay, this is not a six 99 product.
It’s a three 99 to four 99 product. Right. And, you know, thankfully because of the team, we have, we’re able to optimize our, our cogs or cost of goods and, you know, still be able to hit that FRP, knowing that, you know, the distributor and the retailer were making their margin, it could have been a fatal mistake, uh, like, because.
At six 99, it wasn’t selling at the velocity that we wanted to plus we, you know, we wanted to launch it as an on-premise brand and be, you know, kind of high profile and hospitality and so forth. And those price points were perfect for that. But, you know, after COVID we were forced into a more retail strategy and we had to lower pricing and it could have killed our brand.
And again, thankfully, uh, you know, we were a step ahead of that and really thought through it. So, you know, obviously. Uh, you know, knowing your exact cost to the penny, to what your shelf price is going to be. It’s an exact science, there’s no estimation. Um, and that gets you to kind of your gross margin. Uh, but after that, you know, you’re not getting on shelf in retailers or driving trial without giving promo without.
Uh, you know, given what we call, give gas, like giving a retailer a reason to try your product. So you might tell them three cases and give them one free that he sent to margin. Uh, you might, you know, give ’em off invite or invoice promo is that, Hey, you know, two, you know, two for five or two for this that every, every charge that goes to the customer gets still back to the supplier to us.
Right. Nobody else is taking up the bill. So you also have to build in promos and things about giving that product away. This is what kills a lot of brands. Also, they give way too much product away. Uh, you know, they’re burning cash and ultimately their margins are just too low to sustain it. So, uh, make sure that if you are going into the space that you, the financial side of your business is, you know, Um, is headed by somebody that has extensive experience in this side of the business.
I don’t care how great your product is. You can’t make your margins. You can’t do your promos. You can’t support retail. You will not make it plain and simple.
Ken: All right. And I think that’s it. That’s a good, a good explanation of kind of painting that landscape for us. And then I, I really do appreciate the, you know, the, the items that you brought up about what kills, um, you know, some fledgling fledgling brands that are trying to go out there.
It’s not considering, um, for instance, landed costs, you know, that you’re not calculating everything into that. I’m not thinking about promos. I’m not thinking about the margins that you’re giving up to the retailers and to the, to the distributors.
Marc: Right. And they’re shipping to your distributor. Somebody is paying for that.
It’s going to be you. And that could be 50 cents a case. But if you don’t put that on your landing, You know, your cogs or somewhere on your, your P and L that eating into margin, every single penny is eating into your margin. Right? And, you know, as a new brand, you want to maintain margins. In my opinion, you know, north of 30%, when you go to raise institutional money, they want to see margins at 40 or 50%, or at least a pathway to that when you get purchased by Coca-Cola, they want to know that.
You know, they could take your entire infrastructure and, and make it that even larger. Right? So it’s about creating pathways and you don’t want to come out as a new brand and have 70% margins. That means that you’re not promoing enough or giving too much away. Uh, you know, you want to drive trial. So it’s actually interesting different stages of your business.
You know, what are healthy margins, you know, to have. And use that margin to your advantage. If there’s excess margin, then give better deals and drive more trials. The only way you’re going to get the velocity in the turns is by getting more product out there and use that margin to your advantage. Uh, so it, it’s definitely a science.
And again, again, as I talk about my team, thank God I have the team that I do because, uh, I would not have known about any of this, uh, no matter. What I’ve done in the past and what I can say about my resume, these are things that I’ve learned on the job, and I’ve had amazing people around me, which I can lecture all day long.
You know, entrepreneurs are sometimes not CEOs. You know, we have to earn our stripes in terms of operations, just because we have a great idea. Doesn’t make us true CEOs. I didn’t become a real CEO until I started cloud water. And I was a CEO of onboard for 15 years. And, uh, that’s it. You know, pretty start type of statement.
But, um, you know, now I look back and now I understand so much more about what I learned in the past or what it actually takes, you know, to, to lead a company and, you know, know your strengths and get the hell out of the way. If you don’t have them and put somebody in there that does, and that makes you a great leader, not somebody who’s weak and that’s pretty academic, but unfortunately some people run with ego and they run, run into a wall.
Ken: Let’s let’s change gears just a little bit. Um, you guys just recently, um, uh, got, got into stop and shop, um, and I understand that’s still rolling out. Is that true?
Marc: Yeah, we’re we just landed and we’re in on shelf on 110 stop and shops on the east coast, which was a. Yeah, really nice sweet victory for us in the middle of COVID and really starting to prove out that model for, and that was our immunity line, you know, to get into a bigger chain, to get a hundred stents, 10 stores, you know, at a clip. Uh, but yeah, uh, up and down the east coast, we are in those stores as we speak.
Ken: So how did that come about? Maybe you could tell us how, how you got on their radar and how you got the deal.
Marc: Yeah. So like any other industry, uh, you know, there’s, there’s a lot of relationship based, uh, you know, stuff going on. And, uh, we have a, you know, just a lot of, uh, you know, uh, beverage. Kind of veterans and, and experts on our team. And, uh, really the key is a, buyer’s not going to buy you as a favor to a friend, but a buyer might pay more attention to you if they know you’re coming in, or somebody makes a phone call and says, Hey, make sure you get the brand to look.
Th there’s something pretty special here. And that was the case, uh, with stop and shop and they were incredibly gracious to give us a shot because we’re a young brand. Uh, but they spent a little extra time looking at our brand and listening to what we have to offer, uh, beyond just a sales deck and a sample.
Uh, and you know, they, they really appreciated our path, our passion and our approach. And most importantly, that we would fully support the partnership, uh, and you know, Uh, it really helped to build it. And those, those ingredients, you know, kind of led to their decision, we’ve been turned down just as fast by other chains, uh, because we didn’t have those types of things installed in the sales process.
Right. So, uh, again, I don’t, you know, we think we have a great product and our customers are, you know, again, obsessed with it, but that doesn’t mean a buyer is going to see it that way. And, uh, you know, again, there’s some luck of the draw there. Uh, you know, uh, you know, is to get in front of these buyers and really try to make a strong argument.
You know, why you versus another brand. And it’s not just cause we pay screen because there’s a lot of power and passion behind this brand. That’s going to drive the success of the partnership.
Ken: And, uh, you mentioned a little bit about COVID into your remarks. What what’s been the effect of COVID on your business.
Marc: Uh, you know, taking some pages out of my previous experience when we were running a real estate business, you know, through the financial crisis of 2008, uh, I huddled up with the team. Uh, first thing I said is, look, we’re not going to fire anybody. So everybody’s job is safe. And, uh, maybe I was lying. I don’t know, but I, I did commit to everybody, uh, because, you know, look, we’re, we’re all scared enough and I’m like, we’re gonna, we’re gonna make this.
Through one way or another, but most importantly, uh, this is gonna force us to be, uh, you know, more scrappy, more creative. It’s going to challenge us personally. It’s going to challenge us as a business. And I said, I’ll make you one promise and I will base my reputation on it. If we make it through this together, we will be a bigger, better and stronger brand.
And, uh, you know, I I’m, I’m not, you know, standing on a soapbox here, but I have to say that, you know, all of us, including myself, just really dug in and we made a conscious decision to make it through. And I think like anything else in life, if you, you know, kind of make that predetermination and your heart going to give you the best chance, you know, for that success.
And, uh, you know, we were able to. You know, launches our digital strategy or grow it by 300%. You know, we came out with our immunity line and, you know, we were right in the middle of a fundraise that got cut off. So we had 50% of the capital that we thought we would have to make it through. And, you know, everybody just kind of hunker down and.
Uh, you know, if I’m proud of anything, I’m so proud of this brand and to be a part of it, but I am incredibly proud of the men and women that I work with and their commitment to this. Uh, and they kind of, they kind of went along with it, you know, they bought into the notion that we’re going to be bigger and better, and here we are.
And I think we’re, I think we’re much better. We’re getting bigger, but most importantly, you know, we’re stronger for it. So, um, I lost some people, uh, to COVID and God bless everybody who went through a hard time. Uh, so I’m not going to say, Hey COVID was great, but the silver lining was that, you know, if it doesn’t kill you makes you stronger.
And, uh, you know, here we are.
Ken: Yeah. That’s inspiring. Um, and, and humbling in a lot of ways, you know, this, this has been really hard. I’m, I’m happy to be on this side of it and to be, to be coming out of it.
Marc: Yeah. So we’re all blessed and hopefully it builds, uh, some, some, some more awareness and appreciation because a lot of us hunkered down and, you know, American express called me and said, are you okay?
Because I wasn’t out there spending money. And I was just doing the simple things in life, you know, with my kids and my wife and. And my dog and, you know, just finding ways to live a simple life and work really, really, really hard. And to me, you know, not withstanding the pain that so many of us as, you know, Americans or family members or people had gone through, uh, you know, it created some really exciting stuff for the future.
Ken: And so why don’t we just talk about what’s next for your company? You know, um, you’re going to continue to expand in retail, you know, what, what else are you excited about? Do you have any new product lines or flavors or anything coming out?
Marc: So, uh, you know, we’re going to continue to build on our retail, uh, expansion strategy, uh, build on our digital strategy.
Uh we’re you know, we’re, we’re going to relaunch in hospitality because we feel our brand fits really, really well in, you know, high-end restaurants, hotels, clubs, and things of that nature. Um, You know, w we want to get really exceptional at the things that we’re doing now, uh, before we think about, you know, broadening our, our line, uh, you know, we do have a flavor house that we’re always in looking at new flavor profiles.
We’ll have some new flavors coming out for our line here in the near future. Uh, we just got USDA organic status for our immunity line. So we’re launching that. Uh, next month and some beautiful new painted can. Uh, so, you know, we’re always moving forward, uh, because you know, we’re, we’re really excited about as a group, um, is, you know, I come from, uh, you know, a background working in philanthropy, uh, as a New York city kid who grew up, you know, with, with great diversity.
Um, I was exposed to racism of, you know, very early age and inspired me to, uh, work in the inner city communities with underserved, uh, you know, kids, uh, through hockey programs and afterschool programs. And when we launched cloud water, I knew that we wanted to have, I have a social mission, but like everything else we do here, we kind of slow roll it.
Cause it has to be authentic. And we don’t want to just say, Hey, we’re. You know, we’re just donating this or that. And by the way, which is not a bad thing just for us, you know, we want to make an impact. And, uh, so we’re in the process of launching our social mission, which is really to work with underserved communities, specifically those, a food desert areas, uh, meaning that, you know, there’s just not the emphasis on health and wellness and the education of that in underserved community.
And we not only want to donate. Product, you know, that’s good for you. We want to foster education because we, you know, we believe that every kid. Uh, deserves to be exposed to health and wellness and nutrition, you know, regardless of their socioeconomic background. And it just feels real and organic. We have a very diverse workforce here and it’s, it’s, you know, very top of mind.
I didn’t want it to be just driven by me. And, uh, so besides expanding and making money, you know, we always want to give back and, you know, we’ve done our part, you know, in any small way we can, like so many brands has done, which, you know, I salute, uh, but you know, we want, we want this mission to carry forward.
So there’s, we’re expanding and making more money and bragging about our wins were also. Yeah, making an impact to level the playing field out there. And, you know, I say that with a tremendous amount of pride, so those are some of the highlights and we do promise some really exciting line extensions and new products in the near future.
Uh, but for the time being, we have our hands full, we have a lot of work to do and, uh, you know, we’ll, we’ll just keep at it.
Ken: That’s awesome. As we wrap up here, um, just wanted to switch over to the quickfire round. I just have four questions for you. Just tell me the first answer that comes to mind.
What’s a tool or resource that has helped you the most in your career.
Marc: Uh, listening to, uh, you know, folks that have gone through. You know, similar challenges or, uh, you know, more even the same challenges. Uh, you know, a lot of people turn to books. Uh, I messaged people on LinkedIn, uh, who maybe I know, or I want to meet and say, Hey, you know, could I have coffee with you?
Uh, I really want to hear like, kind of a alive, you know, rendition of how you handle this or how you made it through. And, uh, you know, that means dropping your ego, your pride, and just. You know, reaching out, uh, you know, to a resource that, you know, could invariably just, you know, really turn things around or help you through something.
Ken: What is one book that you’d recommend to people?
Marc: Uh, I, I, I read a book, um, called execution, uh, which is maybe the last book I had time to read, but what I love to doubt it, uh, was, uh, you know, how they focused on the planning phase of execution, uh, you know, I love to steal, steal from line to the book, but to say that, you know, you can execute flawlessly against the flood plan and you’ll get a flood outcome.
Right. So, The, you know, people use execution, you know, very loosely execute, execute, but you know, the planning and the nimbleness of that planning is really the underpinnings of whether you’re going to execute to success or not. And that really, really resonated with me. I have a few other books, uh, David Kitter, uh, uh, Uh, big to great.
I think that the title is, I know David personally and I’ve been following him and I just bought his book and it’s on my desk and I’m going to try to find some time to read it. But, you know, my time has been unfortunately pretty short lately.
Ken: Um, what is one piece of advice that you’d give your 21 year old?
Marc: Don’t be so damn cocky. You know, you, you, you know, you know, it all, um, the. The tuition to my success have been my failures and to embrace failures as some of the greatest gifts that you’ll ever receive. Because if you do, you’re going to be, you know, you’re going to turn out great as a person. I used to beat the shit out of myself for, you know, for failing because I left.
Somebody else down or whether it’s my parents or, or what have you. And I left out the part of embracing, you know, what led to that failure? More importantly, I left out the part of what were the lessons that I could have learned. There’s no greater feeling and empowerment. Dusting yourself off. Haven’t been, you know, flung through the mud and then taking a step forward.
I can’t even explain how powerful that is. And a lot of us, you know, seek out pleasure and deflect pain, and that’s the type of pain that you need to embrace. Uh, if you want to be great, when I say great, I don’t mean make money. I mean, just great in a sense that you can wake up every day, confident that you can take on challenges and no matter what direction they come from, you have confidence in yourself and you’ll get back up and move forward.
Ken: All right. And last, uh, who’s a one person in your field of work that you’d love to take to work, uh, or, sorry, take to take the lunch, you know, maybe somebody that, uh, another entrepreneur that you look up to, um, you know, somebody that you’ve been watching their career, uh, who’s somebody that, that you’d love to take to lunch.
Marc:That’s such a great question. You know, I love to take my father to lunch. He, he inspired me as an entrepreneur. He died when I was 15 and he was, uh, uh, Columbia law school. Uh, we made it into Columbia law on scholarship, got drafted. When he came home, he said, I don’t want to be a lawyer. I want to start my own company.
And he started a pet supply company and I watched him. Suffer through building that. And, uh, he never got to finish it cause he passed away. And I’m sorry, this is esoteric. Like I’d love to sit and have lunch with him today. I have one tattoo on my body. It says in your honor. And part of that is from my father who, you know, went against the grain, started his own business, never got to finish.
And I’d love to sit with him today because he was a brilliant man and just kind of. You know, what are you saying? Um, you know, there’s dozens of people out there. I can say, I want to have lunch with, but you know, you asked me for quick fire and that’s what that’s, what’s in my heart. I really love to sit with him one more time and have that discussion, you know, just because I’m here.
So in part, because of the things that he, you know, kind of primed for me when I was much younger,
Ken: Yeah, mark. I think that’s a great answer. Um, and, uh, just to, just to wrap up here, um, do you have any parting advice for, um, anybody that out there that’s in the grind right now with the physical products, trying to get a business off the ground or trying to get into retail?
Um, you know, what, what advice could you offer them?
Marc: Um, so, you know, a couple parts, first of all, if you’re out there in the grind, then you’ve had. Many similar days to me were, uh, either wake up, you don’t sleep. Or at some point in the day, you kind of collapse into a chair on the floor or whatever. And just ask yourself, what the hell did I get myself into?
Or, you know, dark clouds come over. You like failures and pending, or I can’t do this. I’m not going to make it. And you know, you’re obviously still here because you fought through. And just to know that, um, it gets easier. Uh, you know, the more that you kind of embrace that and fight through it, uh, because the nose, which lead to a lot of these feelings, like you get turned down or you get rejected are no for now, they are not no forever.
Right? This is not application to a law school where they said you’re rejected. And you know, you can’t go back. Um, a retailer shuts you down. Uh, it’s not. You know, don’t take it personally. It could be for a million reasons, get that feedback and optimize or, or, you know, change the thing to make, you know, make, make the company more attractive or what have you, and then go back and submit again.
Right. And it really is just sticking with, to your guns and your belief system, uh, because the continuity of that, you know, will allow you to, you know, really. Carry this out. It’s a numbers game. You just have to keep going back and back and back and just don’t give up on your dream. There’s just no reason to do it.
Ken: That’s awesome. And that is a great place to, to end. Uh, I appreciate you mark for jumping on with us. I think we’ve all learned a lot, um, and I wish you the best luck with your product.
Marc: Thanks, Ken. I love your questions and you know, you made this easy for me and thank you everybody for tuning in and listening.
I’m humbled to have this opportunity for whatever you’re doing out there.
Ken: All right. Good luck. Appreciate it. The physical product movement podcast is brought to you by fiddle to find out more about fiddle and how our industry leading inventory ops platform is giving modern brands and manufacturers full visibility into their inventory and operations.
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