How I Built This with Guy Raz - Advice Line with Mark Ramadan of Sir Kensington's

Episode Date: June 27, 2024

Sir Kensington’s co-founder and former CEO Mark Ramadan joins Guy on the Advice Line, where they work through business challenges with three early-stage founders.Today we meet Pat, a physician assistant working to bring his solution for clogged sinks to major retailers. Then Lucas, a chef whose local quick service taco joint is fending off national competition. And Beth, a working mom whose baby products brand is caught in the "messy middle" between launch and mass scale.If you’d like to be featured on a future Advice Line episode, leave us a one minute message that tells us about your business and a specific question you’d like answered. Send a voice memo to [e-mail] or call 1-800-433-1298.And to hear the story of how Sir Kensington’s was founded, check out Mark's first appearance on the show in 2023.This episode was produced by Sam Paulson with music by Ramtin Arablouei. It was edited by John Isabella. Our audio engineer was Cena Loffredo.You can follow HIBT on X & Instagram and sign up for Guy's free newsletter at guyraz.com.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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My guest today is Mark Ramadan, the co-founder of Sir Kensington's. It's a condiment brand that he launched with. the college buddy, and with no prior food or business experience, they took on the giants of the food industry like Heinz. Mark, welcome to the advice line. Thank you, Guy. Great to be here. And it's great to have you back on the show. We had you on the show back in the fall of 2023. And you and your co-founder, Scott, told the awesome story of how when you were in college at Brown, You decided to invent a fake British aristocrat. You called him Sir Kensington.

And you made it in the face of your ketchup brand. And you basically started making small batches of ketchup in your apartment for friends, for college friends, right? Absolutely. He started as a fake character, but he became very real to us. It was quite the journey. Yeah. And, you know, I remember Sir Kensington started out as a specialty ketchup, right? But actually, the business didn't really start to take off until you went, he branched out.

You went to mayonnaise. That's right. And then a bunch of other condiments. And actually, crazily enough, I mean, the ketchup was eventually discontinued in 2023 because the mayonnaise and the other condiments were doing better. What kind of lesson did you learn from that, you know, being sort of being willing to pivot or to really branch out from the original product? Yeah, we spent three hard years doing nothing but making and selling ketchup.

And there were many times where we felt like the business would would die that way. because the traction on the ketchup was not as fast as we wanted it to be or, you know, the adoption was not where we expected. And getting into mayonnaise was partly because we felt like we had to do something to try and pivot and save the company. Also because we were getting requests from it, from retailers. And as soon as we launched it, it really took off on its own. I mean, we were selling more mayonnaise within six months than we were selling after three years

of selling ketchup. And one of the things I think we learned from that is maybe the most obvious lesson, you don't know what your best-selling product is going to be until after you make it. Yeah, it's such a good point. I mean, especially with something like mayonnaise, you know, we had Mark Sisson on of Primal Kitchen, and they were making a competing product, and they also had a lot of success with mayonnaise, right? And you guys were using avocado oils and really, like, you were making a product that wasn't available.

I mean, it's just, I mean, mayonnaise was, but not the kind of mayonnaise you were making. Yeah, and I think the other thing is you sort of form opinions about the category and about the competitors in the category that are sometimes informed by fact, but often they're informed by emotion. So for example, we had this expectation that people were more just as or more brand loyal to Helmonds and best foods mayo

as they are to Heinz, simply because it's just as dominant from a market share position. But it turns out that wasn't the case, that people were not as emotionally connected to mayonnaise as they were to ketchup. Catchup is associated with all of these childhood memories for people,

whereas mayonnaise is just not. And so that was just a big learning that we had which is really forget about all the assumptions that you formed in the category. And price was a big one, too. Avocado oil, mayonnaise, like you're talking about, ended up becoming ours and primal kitchens and others' biggest products. But that was $10, $11, $12 a jar, which would have been unheard of at the time that we started the company. So you just, you know, you never really know what boundaries you're able to push and what's going to resonate with your consumers. I know that you're not going to hold this against me because you're not part of the company anymore.

But, you know, I have a, I think you know this. I have this thing about buying mayonnaise. I think everyone should just make it. Just get the food processor and just, you know, pour the oil into the egg going with the processor. I'm with you, guy. I mean, for those who have the courage and the time, you should do it. It's so delicious. I can eat it.

I know this is going to sound disgusting. I can eat it by homemade mayonnaise by the spoonful. It's delicious. Oh, I've done it. I've been there. It's delicious. Yeah. I just made some other day.

You would have been a welcome guest at the Sir Kensington's Mayo tasting parties, of which we had many. I would have loved to have gone. What are browned artichokes with me? Yeah, just dipped artichokes in there. Mark, I am so excited and happy that you're here because we've got some really, I think, complex questions heading our way. Let's take, should we take the first call? Would love to.

All right, caller, you are on the line. Hello. Is that Pat? Hello, yeah. Pat Early and Helena, Montana. Pat, welcome. Tell us a little bit about your business. Yeah, so my business is Dripsy LLC.

We manufacture the Dripsy Kitchen Sinkstrainer. I'm the co-founder and inventor of that product. And we feel it works significantly better than pretty much any other sink strainer on the market. I don't know if many businesses have put a lot of thought into sink strainers in the past. And I put a heck of a lot of thought into it. So, yeah, we sell mostly online and also on QVC. And we actually just surpassed our one millionth happy sink that has been supplied with the dripsie. And what's your question?

So my question is, you know, we've had good sense. success online and on QBC and those platforms. But we have, you know, we've been trying our hardest to get into retailers for some time now. And we have gotten into quite a few smaller, you know, mom and pop ACE hardware, true value, that kind of store. Pretty much every buyer we talk to, you know, at the store level, that kind of buyer, they like our product. But they say, you know, you have to pass it through the regional buyer or it has to get on the ACE truck. Right. So they don't want to have to order from us. They want to be able to order it out of the catalog. And whenever we reach out to those higher level corporate buyers, you know, they don't really give us the time of day. And I don't know if that's something that I'm doing on my end or if it's something about our brand. And I guess I'm just looking for advice on how we could have some more success with buyers to get into retail stores. All right. So we'll get to your question a moment. What's different about your product than the metal strain?

that comes with the garbage disposal. Yeah, so this all started, you know, to take it back a little bit, I guess. I was in a house that was on septic, so we didn't have a garbage disposal. Right. We had a metal strainer that broke, and I had to go to the store to get a new one. And it was nine or ten bucks, and it broke after two weeks. And I got, you know, I guess it annoyed me enough that I decided to, you know, I was like, I think I could probably do a better job at this.

But, you know, my idea behind the design to get to your, question was I wanted it to fit below the rim of the sink so food and things don't get caught or go under it. And I wanted it to not clog. So you don't have to empty it out five times while you're doing the dishes. And we, yeah, we achieved that. It fits inside the drain nice and snug. Nothing sneaks past it. And it actually, you know, it can fill up completely because the hollow central stem drains water if the basket's full. And it just keeps rocking, man. And it's non-stick. so it empties into the trash skin, no problem. And it's significantly different than any other strainer.

I don't know of any fully flexible sink strainers out there. And are you like an industrial designer? Is that how did you? No. How did you design it? No, I'm an emergency medicine PA. I have no experience with anything like. You're a physician's assistant even now to this?

So this is not your full, this is your side hustle. Yeah, no, I wish it was my full-time job. But no, I just learned how to use 3D design software over the course of, you know, six months. We prototyped it and then found a manufacturer here in the U.S. to make it for us. Are there, I think this is maybe related to your bigger question, but do you have other products in your innovation pipeline that you're working on, like other problems in the kitchen you're trying to solve or not right now? No, we do.

And that's part of the feedback we've heard from buyers is that they want somebody that has a line. They don't want to just have to pick one product to bring into their store. They want somebody to come in that has 20 products that they can. just hang on their shelves and it works out. And we don't have that. And I, you know, I've gone through it in my head and thought, hmm, maybe I should just bring out products that are, you know, status quo. They're not anything special, but there are just more products to have in a line.

But I don't know if that, I don't know if I want to branch out into being a, you know, kitchen utensil brand, right? I think we want to be an innovative kitchen and plumbing brand. So I'm designing right now a hair catcher for a bathroom sink. We do have a stopper. And yeah, I mean, I've, gosh, it's hard because I don't want to dilute our brand because I think what makes it so special is that the product is actually better. You know, it's a better mouse trap, if you will.

And I don't want to come out with a spatula that's the same as every other spatula because I feel like it doesn't, you know, it's not really what our brand is about. But maybe that's what we have to do to be able to break into retailers. Well, take a quick step back. If you think about how do retailers make money, what's the retail business model, and why might they be frustrated with a single, single skew brand? Ultimately, they're not really in the business of solving consumer problems. They're in the business of making money.

And so for every vendor that they work with, there is some amount of fixed costs associated with that, right? Communication time, invoicing, chargebacks, and so on. And so the easiest thing for ACE or for true hardware to have is like three vendors to only work with OXO and two other ones, right? A good better best model, which is why like if you take the catch up category, circa 15 years ago, there was a good better best brand. That's it. There was the value brand, there was Heinz and maybe an expensive one because the fewer brands you have in the same amount of space, the less work it is to manage your shelf and to make money from your shelf. So from a retailer's perspective, it's always easier to have fewer, bigger, bigger providers.

So that's probably why you're getting pushed in that direction. For your specific brand, I mean, I looked at it online. I think it's beautiful. I love that you're solving a specific problem in a different way. So it's not obvious to me that there's anything wrong with your brand. And I would strongly recommend you don't breach your own brand values there, right? I'm 100% in agreement with you that if your brand is about solving problems in a way no one solved it before, then you have to stay true to that brand commitment that you've made.

Yeah. And not to make it all about condiments. you know, when we launched mayonnaise, it would have been really easy to just say, well, let's just launch like a mayonnaise that looks like every mayonnaise in Whole Foods, but we didn't. It took us a long time to say, well, how would Sir Kensington's make a mayonnaise in keeping with the quality of the ketchup? And that was by creating a supply chain for certified humane free range eggs. We were the first company in the country to use free range eggs. And that took longer. It was harder, but it was a unique solution that suited us. So I think the equivalent here

is true. Don't just come out with 10 things and be like a slightly more expensive oxo. Because they already have Hoxo. Right. As you're thinking about product development, one encouragement I would have for you is as much as you are focused on solving a real problem, and that should be your starting point, there's lots of different sizes of categories in the general store that you're playing in, right? And I don't know what the relative size of a sink catcher is versus a hair catcher for the bathroom versus XYZ product that I could go by from ACE.

But as much as you can figure out, what are the category sizes, what is the depth of competition, what is the turn rate on these items, what's the margin that the manufacturers and or the retailers are making? Those should all be factors as you're going through the process of figuring out what do we make next. And, you know, Ser Kensington's was no less brutal and ruthless about going through that qualification. There's a million things we could make. We ended up in mayonnaise for lots of reasons, not just because it seemed like an obvious adjacency, but also because it was bigger than ketchup. And the turn rate was faster and the margin structure was better. And our co-packers could make it. And so, you know, I would go through that same check, create the checklist.

And if you don't have any money to buy data, which I assume you wouldn't necessarily be buying data here, you can go to your local stores. You know, whoever you're selling dripsie to today, just beg, borrow, you know, plead with the store managers and say, help me out. Like, what sells well? You know, what do you think your customers would be excited to see a new version of? And cross-reference that with your own problem-solving interests. And that should land you somewhere that is both.

both a good idea and is a good business. Yeah, yeah, that's great advice. I want to see that like, I want to see a commercial and advertisement of like the garbage disposal guy, repair guy, just like bored, like swatting flies, waiting for the phone to ring. And then, you know, dripsie, keeping your drain clog free since 2019. We're the company that makes water flow. You make water flow. Yeah. You make the water flow.

I like that. That's it. I like it too. We just did this been a think group. I like it. All right. Cool. Pat Early, the brand is called Dripsy. Good luck. Thanks for calling in. Thank you so much. All right. Take care. Thanks. Bye. Cool. I like that. You're nailing the slogans. Yeah, right. I mean, you've had to call a plumber before. Yeah. I've had my, I have had that exact issue. I've had a bad sink catch. Yeah. Yeah. I'm the one, I don't do the cooking in the house, so therefore I do all the dishes. in the house and I've definitely, I'm the one who's cleaning out that sink trap three times during

a wash. And I have, it's not, this is not about, I love plum. My grandfather was a plumber. So I love plumbers and I want to give you guys business. But I'm just saying, you know, it's the call, it's the wait. It's the being at the house between, you know, noon and 8 p.m. And then you're like, I met the house from noon until 8. And then it's 745.

And then he arrives. And he's like, yeah, I gave you an 8-hour window. Yeah. And you're like, are you kidding me? And you're like I'm in the middle of making my mayonnaise. I can't stop this now. I've been waiting for you since noon. So I'm just saying all I had to do was put in the dripsie and that would never have happened.

I see a short-form video. It's not just an ad. This is a whole series of content. It's a whole bunch of content. All right. Okay, Mark, we're going to take a quick break. But when we come back, a taco shop owner who's about to get a very competitive neighbor, Chipotle. Stay with us.

I'm Guy Raz. And you're listening to the advice line right here. on how I built this lab. Welcome back to the advice line on how I built this lab. My guest today is Mark Ramadan, co-founder of Sir Kensington's. So, Mark, let's go ahead and take another call. Yeah.

Hello, hello, Lucas. Welcome. Hello, Mark. I'm honestly honor to be here. I've been listening to your podcast for like ever. Thank you so much. Tell me where are you calling from and your business.

What's the name of your business? So my name is Lucas Mantec. I'm originally from Argentina. I've been living in KMEA courthouse, South Jersey, and a small seashore community right by the beach. As a chef and entrepreneur, I'm the proud owner of Taco Shop, the quick service restaurant with focus on made from scratch, tacos, and plus. Got it. Okay. And tell me what question you brought for us today. So what are your thoughts on tackling Chipotle? as a competitor. Like, should I try to attract some investors to scale my business, you know, to piggyback on Chipotle's strategy, to establish locations that capitalize on their customer base and market influence?

Got it. Okay. We're going to get your question in a minute. So right now you've got one taco location, one taco shop, which is in Cape May Courthouse, New Jersey. Is that right? Correct. That's correct. And you open this in 2022, from what I understand.

And tell me about how it came about, how that restaurant came about. So I've been in the food industry for about 30 years pretty much. I've been a chef. I opened multiple restaurants. I started, you know, hot dog stands. I own a seasault farm. So I'm a naturally like entrepreneur and chef, right? So after the pandemic, we kind of like shrink our businesses,

keep the things that they made sense for us financially and concept-wise. And we decided to put, you know, all our gains pretty much into one concept that was taco shop. Yep. So we opened this concept as, you know, the idea of a QSR, quick service restaurant. And we are doing great. You know, we serve in a small community, a very seasonal community. Because Cape May is right on the Jersey shore there. K-May is right, yeah, we're about five minutes from K-May.

And our concern, you know, with the price increase in food and, you know, restaurant industry as tough as it is right now, our concern really is having a competitor as Chipotle coming into town, which... Is Chipotle in town? Are they near you? They are about 150 feet. They're supposed to open this summer about 150 feet for us. Wow. Okay. So you've got a taco shop. It's a one-off and Chipotle is about to open up there. And so what besides tacos, it means tacos, burritos, just, you know, what you would find, similar to what you would find at Chipotle? So, you know, from a starting point, me being a chef, I did like a huge market study before I started this concept and I wanted to differentiate ourselves from any competitor, including Chipotle. So we thought,

focusing on tacos was the smart thing to do. We don't have an assembly line. We do like kind of a cook-to-order, but we're really fast, right? So everything is, it's been designed to be out within five minutes. And I'm looking at your website, and so you do like kesa burrias, and you're doing fish tacos and fried chicken tacos. And so you're really doing different kinds of tacos here. I mean, things that Chipotle would not offer. Correct.

And as well, you know, I'm so passionate about food that I keep up with the trend. So ramen, it's pretty big right now within the market. So we have a mexie ramen and the same with Pocke. So we have a variety of items to add on to our mix of tacos and as well what the other competitors, you know, they do. Mark, you faced a giant competitor, Heinz, with your ketchup, with Sir Kensington's. And of course, Lucas is facing the impending arrival of Chipotle, 150 feet from his taco shop, which is obviously a massive multi-billion dollar empire. Any initial thoughts before we dive into his question? Well, first of all, I'm happy to hear that you made it out of the pandemic and you have a concept that's working.

So congratulations, because a lot of restaurateurs and chefs did not. So you should feel at least proud of where you've gotten to. I think at the highest level, like competing with a monolith, like any major company, you just have to recognize there are some things that they do very well and some things that they would just never do. And the things that they do very well are systems, routine, predictability, dependability, and usually cost and price, right? So that means they're very good.

Chipotle is an excellent example of a restaurant that has managed to maintain the expected level of quality at significant scale, but no one would call it their local taco spot, right? I mean, what Chipotle is not good at is they're not good at creating a local integrated community feel in any of their stores. And so, you know, my initial instinct is don't compete with Chipotle doing what Chipotle does. Chipotle is going to out Chipotle you 10 days out of 10, right? They've built the machine to do that.

But when you go into a local restaurant, you expect to have a local feel there, whether that's, you know, local performers or musicians, local additions to the menu, or even a little local market there. These are just random examples of how do you make your store not feel like a competitor to the chain restaurant next door, but actually its own completely new thing? And one part of that equation is you. It's the personalities behind the counter, right? It's the people because what is a hospitality experience, if not people? And then the second is the environment. I mean, the food, maybe you both serve tacos.

but that's almost incidental to the emotional experience you're delivering. Right, right. And to be honest, the idea behind Taco Shop as well, it's like, trust the chef behind the scene, you know, that is going to offer you the best experience that we can. And fast. And, you know, going back to the atmosphere is, my wife, she's a designer, and we take a lot of pride as well about the atmosphere, you know.

It's like we make sure that we didn't copy absolutely anything that it was already, within our competitors or marketplace. We created a very, very unique concept. You know, Lucas, I'm looking at your website, and you just mentioned this idea that, like, hey, trust a chef and all this stuff. I know this because I was looking at your bio, which is not on your website, or it's not easy to find.

You're a nominee. You're a James Beard nominee. I mean, you have this incredible pedigree, And I wonder why on the website it doesn't say tacos from a James Beard nominee or, you know, or chef driven. I mean, Steve Ells, who started Chipotle, was a trained chef. He did go to culinary school and his dream. We did him on the show many years ago. His dream was to build a Michelin three-star restaurant.

That's why he started Chipotle to finance it. It never built a Michelin restaurant. But Chipotle was a result. But it was chef-driven. I feel like just from the entry point, you know, where the. it's a website or coming into the restaurant, you need to tell me this is driven by a chef, a James Beer nominee. Right, right.

And you're correct. I just, you know, it's really hard. The perception of tacos is always going to be tacos are cheap food, correct? So the fact that I'm a chef, I'm always afraid that we're going to scare people away thinking that, you know, we're too upscale or even over the core, you know, we made it a simple as we can because we are concerned that, you know, people are not going to be feel comfortable when they walk in the door and feeling like they're going to pay a higher price that they can right around the corner. And, you know, we stand behind our quality, but the first

perception, really, for a guest to walk in through the door is so important that, you know, it's tough. It's all these elements that we try to balance to make sure that we can cater to everyone. I mean, this is maybe a contrary in opinion, but I think that the word to focus on in terms of your guess is maybe less price or cost and more value, right? Value is like price meets expectations. That's just one definition. But you could raise your price and also raise the experience that you're delivering or raise

the ante on expectation, and people may well be willing to pay that. My fear for you, again, I haven't been to your restaurant, so I don't know if this is the case. But my fear is if you engage in a price war with Chipotle, you will definitely lose. You will never have the cheapest, most profitable tacos, right? And so that's a losing fight from day one. What you really want to do is figure out what is the community center that your guests are looking for during this summer season in Cape May, right? And I can think of so many little beautiful seasonal shops out in the North Fork of Long Island or in the Hamptons or all the beach communities around the U.S. And they're all sort of like multi-factor places.

They serve coffee in the mornings and that they have delightful sandwiches in the afternoon. And there's also a bookstore. And maybe they also sell toys for kids because people want to buy toys in the summer. And there's probably also ice cream in the afternoon. And I'm not saying you should do any of those necessarily. But if you shift your thinking from, we are a taco restaurant competing with Chappalo. to we are a community destination for summers in Cape May, serving great food, which happens to be Mexican food, I think you can really change the value expectation people have of your restaurant.

If I go in and, you know, I'm faced with beautiful design objects and you have comfy chairs and there's a James Beard nominee behind the counter and you say, well, the tacos aren't eight bucks, they're 12 bucks or 13 bucks. Maybe it's a very different story. Right, right, right. For sure. You know, Mark, I think that you're on to something really important here, which is, because I know, Lucas, you're wondering, should I bring on investors? How do I, you know, how do I sort of grow this? Because ultimately, your idea is to grow this and to scale this, right? But initially, the immediate threat is this Chipotle coming. And let's be on. Chipotle is a great chain. It makes high quality food. But here's where Chipotle underperforms. And here's where I think, Mark, you're exactly right about the community thing. Here's where you can really do. differentiate. And that is hot sauce. If you go Chipotle, there's Tabasco and there's Tabasco

Chipotle. You could create, you could just get a wall. Like right now, you could just have a wall of 200 hot sauces at taco shop, right? I mean, there's got to be people in New Jersey making hot sauce. I know there are people all over the country. Well, that's me, guy. We have four different sauces. We have holly camoli. Jimmy Jimmy. Jesus Mary's hot. I love it. J.M.J.

We actually make our own hot sauces, and that's the only hot sauce that we serve at the restaurant. You know, it's... You know, and again, it's... We never thought that we were going to be put on the field to compete

in such a big league, and we didn't choose this. It happened, and now Chipotle coming in place, you know, we know that they're going to to take 30% our bottom margin, you know, and that is our concern because being a seasonal business where, you know, our summer months are incredible and our winter months are disaster, you know,

20% would really damage the business. So it's, we're in front of a situation that we need to take action and that's our concern. I would just say on the fundraising side, I would not recommend raising funds until you have a concept that you feel confident that is working, not only because I think it puts you in a position where you now are suddenly owing people money and you don't necessarily have the runway ahead of you to pay them back, either through scaling or through selling the business. But I think it distracts you from what should be your core mission now, which is how do you deliver something that's valuable to your community, rather than how do you pay back your debt facility or pay back your investors.

I work with a lot of restaurants. And those that are loaded up with debt can't focus on operations. And those loaded up with equity investors also are distracted from finding opportunities with their operations. So I would definitely focus on, I mean, I'm not saying don't raise money in the future. But typically you would want to wait to do that until you have the concept that's humming and buzzing and you feel like I can't help but open a second location. And I think you get there by creating a cult following. Right. I mean, Chipotle scaled, sweet green scaled, all of these businesses scaled because they first had a home base that had a cult following. Yours will look different than Chipotle's. But again, not to repeat myself, but I'd encourage you to really think about how do you deliver a service that is not tacos to your guests? You may serve tacos, but what's the service? What is the environment they're walking into? Why are they coming there? And if the answer is because your tacos are better, I don't think that's a long-term sustainable differentiation from Chipotle. Not to say yours aren't delicious, but it's tenuous if they're 100 feet away.

Right. But how do you create something that's more that's emotional, that's cathartic for people, you know? That's the beauty of local small businesses. Right. And I think you can do that through products, like I was saying with a hot sauce. I think you can do it through menu integrations, whatever's fresh from the farmer's market. Chipotle will never do that. And I think you can do it in ways that are cheaper free to you, like I mentioned this earlier, but invite a local musician to perform every Thursday. Yes.

You know? Have a band. there, a local band. You go in there to hear great music and have great food. That's a great idea. Tripoli is never going to compete with that, ever. Right. And the other thing is the quality of what you're producing, the quality of your ingredients, your pedigree, you're making the hot sauces.

I didn't know that until you told me that. Yeah, we make our hot sauces. We make fresh tortillas every morning. In-house. I mean, this is not. This is, I don't see this on your website. Maybe you're advertising that in the restaurant. But man, I mean, I feel like as part of your brand Bible, we make everything in house. You make your tortillas. I'm eating that. You make your hot sauce. Like you steep the chilies and vinegar and you're making it. I want to try that. But you have to tell me that. Yeah, that's a good point. Mark, any final words of wisdom for Lucas? I guess I would only say do whatever you can to keep track of the community that you're building and stay in touch with them.

You know, whether you have a newsletter, which costs you nothing, right? Or even just like some sort of way to keep track of who's coming in and out to actually stay in touch to let them know the events that are coming up, to let them know what kind of specials you're doing. Again, these are like the super low-cost ways to stay close to that community and remind them that you're still there. Right, right. All right. Lucas, thank you so much for calling in. Thank you so much, guys. I appreciate it.

It's taco shop. Good luck. Thank you so much. I mean, homemade hot sauce? Sounds great. And four different kinds? You know that one of those is going to be really fiery. And I'm like the one who's, I'm always like, I'm going from the mile to all the crazy dragon fire breathing one.

Because I just, he's making it. You know, though, your idea of the wall of hot sauces was great. There used to be a restaurant in Hudson, New York, up in the Hudson Valley. It was a Mexican restaurant. And they had like literally 100 hot sauces that you could pick from. And it was so fun because every meal was completely different. I remember there's a barbecue joint in Washington, D.C. that has the same thing. And it's so fun.

Yeah. Mark, you launched, of course, into this incredibly competitive space, not crowded, because ketchup's not crowded, but it's very competitive. obviously dominated by, you know, and mayonnaise too, by big multinational brands. How did you guys think about competing with those brands? Or did you think that we're not even competing with them at all? We're not going after the same customer. We definitely recognized that there was competition, but I don't think we saw Heinz as the big, scary competitor, if that makes sense. If anything, we saw inertia as the competitor.

People are on, you know, they're not impulse by. buying different catchups every week. And so the real competitor was habit. And so we thought about how do we break a habit rather than how do we switch people away from Hines? And so most of what we did at the very beginning was get in front of people so they could taste it. So that was doing demos and stores, most of which at the beginning Scott and I did ourselves or we would be on restaurant tables or hotel room service trays because those are opportunities for people to actually taste it. Because at the end of the day, what we were really trying to build was a taste, an emotional taste experience. And if it's just sitting on a shelf and it's one jar out of 50,

and people are on autopilot anyway, that's no way to get someone's attention. We really had to cut through the noise. And so everything we did was about how do we cut through the noise? All right, Mark, we're going to go ahead and take another quick break. But when we come back, how to keep your baby from freaking out at dinner, a new kind of place, Matt. Stay with us. I'm Guy Raz. and you're listening to the advice line right here on how I built this lab. Welcome back to the advice line on how I built this lab. Today, I'm taking calls with Sir Kensington's co-founder, Mark Ramadan. Let's take our next caller.

Is that Beth? I'm here. I'm here. And oh, my gosh, I've been a fan of this show since the very first week I had my business. Welcome. Thank you for listening to the show. Beth, tell us where you're calling from and just a little bit about your business. Yeah, my name is Beth Benicki. I am from a little town outside of Rochester, Minnesota, and my business is Busy Baby.

We have the first ever interchangeable system of food-grade placemats, tethers, and accessories that keep babies things within reach and off the floor at home and on the go. All right. So tell me the question you brought for us. What guidance would you have to offer a company that's navigating the messy middle phase where you're outgrown the startup tactics, but you're not quite ready for, you know, big brand strategies yet? All right, cool. I believe, Beth, you were on how you built that, this segment that we used to do back in the day where we would have, you know, two minutes about a small brand. You were on our show back in the day, right? Busy Baby was. I was. Tell us a little bit. It's a, it's like a place mat that you put on like a high chair, right, for a baby. But it's got a bunch of strings or things that you attach to baby toys. Yeah, it's really simple. It's a silicone place mat with suction cups on the bottom so you can stick it to any smooth, clean surface. And then it has a tether system of silicone kind of bungeys. We call them toy straps, tethers, that you can hook to the mat and then you can loop them through or around pretty much any toy you've already got for your baby.

All right. I can only imagine how this started because I remember, even though I've got a 15 and a 13-year-old, but I remember losing my mind when they just throw things off the high chair, like carrots and banana peel. Now that you can't tether. But everything, the rattles and the bottle and it was just all all over the place. It used to drive me nuts. I eventually learned how to cope with it. I have to imagine that's how it started for you.

Yeah. I mean, it starts out innocent enough. It's a lack of fine motor skills. Babies just can't hold on to things. They drop them. But then when they learn quickly, it can be a very fun game of fetch with mom and dad. And is this what was going on with you? You were a parent and you saw this happening?

Yeah. Oh, kind of. I had my first child when I was 40, so I was a little bit later in life, and I was working a corporate job. And when I went back to work after maternity leave, I went out to lunch with a couple of my state-at-home mom friends, and they brought their daughters with them. And while they were super cute, they were very distracting. And we couldn't honestly finish a conversation. So while we were sitting at the table, I went on Amazon to buy something so that when my son was big enough, he wouldn't be that distraction at the table. And there was nothing.

Nothing. There was, you know, there's pacifier clips. There's always been, you know, you know, hook a pacifier to their shirt. But, you know, there needed to be a place to put food and a way to keep the toys off the ground. Okay. So now you're at a point where you're not a startup, but you're not massive. Do you mind sharing roughly what your revenue is? Yeah.

I mean, in the five years we've been in business now. We've done just over $14 million in sales. Wow. So this is pretty great. And are you still growing or is a growth slowed down? Well, that's kind of the sticky spot right now. along the road, I grew very fast. I was on Shark Tank in my third year. And also during the pandemic, we saw a ton of growth because everybody, you know, that's when I started marketing

on Facebook and Google and everybody was stuck at home. And everyone needed something to keep the baby busy while they were homeschooling the other kids or taking a Zoom call for their job. So anything that was like keeping the baby occupied even just for 20 minutes so you could get through these things, it just blew up. And so at the time, I was still working my full-time job. I didn't have many expenses other than the inventory, really. And then the Facebook ads. So at that time, I convinced my brother to quit his very stable full-time job to join me in this very unstable roller coaster of entrepreneurship.

And, you know, it took on his salary. And then I ended up quitting my job and took on my salary. And then we needed health benefits. So the company paid for health benefits. And before I knew it, operating expenses just kept creeping up. up. And the more you sell, the more general liability insurance costs and the more all these other things cost. And cash flow was never an issue in the first few years. And so I didn't pay close enough attention. And now cash flow is an issue. But we have several large opportunities this year.

We're, we just launched on Target.com. And we are onboarding right now with Walmart. And Walmart really loves our products. And they love our innovation. And it's an amazing opportunity that's going to cost a lot of money and just scares me to death. So that's another big part of the story that is where I'm kind of stuck in this messy middle. Yeah. So getting to the messy middle is still an accomplishment, by the way. So congratulations. You know, 14 million of sales means there's a real product market fit. There's something, there are families that love this. So that is an important part to not get lost in the question. One sort of high level point is that retail is, a blessing and a curse. It can be a blessing because large customers can mean large orders,

and large orders can give you certainty and predictability. It can give you leverage with a bank facility, which I'll get to. But the downside is that they are more expensive to work with, and you get your cash much less quickly. So when someone buys online, you get their credit card payment right away. When Walmart buys, it might be 30, 60, 90, 120 days until you get paid. And you often don't get paid for 100% of what you ship because in retail, there's all sorts of Mark Downson deductions. So one thing to just keep in mind is almost inevitably, if you launch in retail, things will get messier before they get better in terms of your cash and inventory position. One question I had is, do you have, I heard that you have a home equity line of credit

separately for inventory financing. Have you ever spoken with a local bank or debt provider to help finance your inventory? Yes, we have actually a fantastic hometown bank. So I've since closed the home equity line of credit and we've opened inventory lines of credit with the hometown Bank. They're currently maxed out. Last year, Q1 was the biggest quarter we ever had. And so we ordered a lot of inventory to support that growth for the rest of the year. And then, you know, Facebook and Google ads started underperforming and the year kind of fell apart. And so we ended up being stuck with a lot of inventory and not being able to pay down those lines of credit yet. Understood. And your inventory doesn't have a shelf life to it, right? You can, right? Okay.

And then another question is, from a gross margin perspective, do you feel like you are covering, in a normal world, is your gross margin high enough to cover your costs on an ongoing basis? Yes. In a normal world, our gross margins are fantastic. I think we took a lot of missteps with marketing in the last year that helped put us in this position. We're correcting that this year. And that's kind of how I'm looking at the retail opportunities is not only is it maybe some bigger orders, but we're getting in front of more faces because people are going back to stores. And the online marketing is not working as well as it used to. So I also look at Walmart and Target as just sitting there on the shelf. or being in the baby section is marketing. Certainly true. It's marketing, and then obviously it broadens your exposure to a huge audience. What about all of the little retailers in between online and Walmart and Target? Have you spoken to local retailers? I don't know who your big one would be in where you live, but what about all the smaller ones?

We're in about 400 independent retailers right now, and that's just mom and pop shops that have reached out to us saying, you know, we love your products. We'd love to sell them in our shop. I'm actually sitting right now in a VRBO in Vegas because we're at the baby expo. It's the big retail event of the year for baby stores. Great. Well, so I would say there's no silver bullet because what you're describing is a very common issue. If you're growing quickly and you don't have a pile of investor capital, then financing your inventory growth will always be a challenge that you face, right? Unless your gross margins are, you know, 70, 80, 90 percent.

And even then, depending on how quickly you're growing. you're always going to have needs that outstrip your current cash, right? So there's no silver bullet answer. I would say that one thing that you can explore, depending on how excited the buyers are for your products at these various stores, is negotiate an agreement so that you can get your first few payments sooner than normal. So, you know, if you have set payment terms of net 30 or net 60, whatever it might be, you could ask for exceptions for the first couple of payments to finance the large initial order. you know, that's one thing you could do. You could negotiate some of the discounts they take a little bit more aggressively. I'd also say almost every brand that I work with, including the ones I used to run,

dramatically reduced investment in e-commerce, meta and others, because it's the problem you're facing is the same problem everyone's facing. It's just not efficient. And so a lot of people move those funds out of online into point-of-sale marketing. So making sure that people are aware that it's in Walmart, for example, or target. When you get into those stores, really focusing on services like Instacart, I've seen that have a much higher, I'm talking like two to three times higher ROI than spending on meta. Wow.

Yeah. So not just maintaining your dollars, but actually shifting your dollars into more profitable retail marketing. I do what I do. I'm seeing a commercial. I know you on your website, you've got a video of a baby, you know, just kind of playing with it. But I, I have this vision of like, a row of babies of like 10 babies and some of them are just quietly playing and some of them are screaming and crying and freaking out and throwing things and some of them are doing other things it's just like a line of babies and high chairs and that's just a static shot of it's like just watching babies play with this and and just chaos I invite you to go to that photo shoot and last more than 20 minutes It just sounds so funny.

It's like a bunch of monkeys at the zoo just looking at babies for, you know, just it would be, anyway. Maybe I can find a daycare center that'll let me come in and do that. Yeah. Yeah. You know, promise the parents a free mat, you know. Yeah, lifetime supply of baby products. Let me give you kids. Do you think, have you thought of also making, I know you sell accessories, but also making the toys that, you know, the tactile things?

I know you make a couple things like a spoon and a, but other things like noise makers are things that you guys make that you would attach to the tray. Yeah, I mean, we've done some teeters. We've done our training spoon is like really, really popular with the feeding specialist. One thing we've learned is the safety considerations when you're making baby products are just really painful. And so we want to stay away from moving parts and magnets and too much of that stuff while we are still so small. But we were hoping to find some new items at this event we're at that we could maybe just private label, find something that already exists that complements our product line that we can just put our brand on. Yeah. One other, this is maybe just going back to the OPEX for a second.

One other, I just wanted to share a perspective on this, which is just that in the messy process of building a business, sometimes you have to invest before growth and sometimes you invest too much before growth. And I, in both businesses, I've run multiple times, have we been faced with the reality that we have invested too much in anticipation of sales that never came or came, but came much later. And I've been through incredibly painful moments where we've had to let members of the team go because, you know, my fault in hiring too quickly or putting too much fixed costs on the business. It's not always people. Sometimes it's software and services, whatever. And we had to retrench, you know. And in a world where money is limited and you aren't taking investor capital and debt is scary because you have covenants and you have restrictions, something's got to give.

And so I would just make sure you know it's something that everyone's had to go through in right-sizing OPEX as revenue catches up. And it's hard, but it's often the thing that you must do to get through to that next phase of business in conjunction with other things. So it's often not let's cut OPEX and lose people and therefore everything will be saved or let's invest over here and we won't have to cut people. Sometimes it's both. And sometimes it's not about cutting. It's about, you know, reducing the raises or reducing the health care. There's all sorts of, you can do this with a fine tooth comb and it's very hard and it's very depressing,

but it is very normal. Thank you for saying that because it is very hard. And that's a lot of the things we're doing right now. And it is very depressing. It feels like I should be such a success story right now with the numbers that we have and the journey we've been on. but it doesn't feel that way in this moment. And so I'm hoping that all the efforts we're making right now will soon come out on the other side of that. And it feels good to know I'm not failing, that it is something that companies go through.

I mean, I know it seems scary, but you've come a long way, and it's awesome to see the progress that you've achieved so far. Beth Benicki, Baby. Congrats. We're going to be following you. Thank you, guys. Good to meet you.

Thank you. Bye. Wow. Mark, I mean, some serious, weighty questions, you know? Big ones. I mean, all of these are classic business issues, right? How do you compete with the incumbent? How do you make it through a period of high cost?

How do you think about product development and innovation? How do you get retailers to listen to you? How do you build awareness for something that's brand new? These are all the challenges virtually every business worth building. So, yeah, absolutely. It all felt all the categories were different, But all the problems were very familiar. I forget who said this, but someone more famous than me said, every time your business doubles, it breaks.

And so running into these issues is something that everyone has to deal with. And being open and vulnerable to talk about it and get feedback is also okay. I felt like I was constantly putting on some sort of suit of armor every day, like pretending things were great, pretending that everything was going well, including with investors, even when they could have helped. And so I think being aware that problems are constant and that people are desperate to help you if you ask for help, that would have been helpful to me. Yeah, for sure. Makes a lot of sense. Mark Ramadan, thank you so much for coming on to the advice line. Coming back on to how I built this?

Thanks, Guy. This was great. And by the way, if you haven't heard Mark's episode of how he and Scott built Sir Kensington's, go back and check it out. It's an incredible story. You can find it in the podcast you will also put it. a link in the podcast description. And also, don't forget to sign up for my newsletter at guyraz.com. We put a lot of great ideas and advice from the world's greatest entrepreneurs.

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in the podcast description on your smartphone. Thanks again. We'll see you next week. This episode was produced by Sam Paulson with music composed by Ramtin Arableu. It was edited by John Isabella, and our audio engineer was Sina LaFredo. Our production team at How I Built This also includes Alex Chung, Carla Estevez, Casey Herman, Chris Messini, Elaine Codagh. Coates, J.C. Howard, Catherine Seifer, Carrie Thompson, and Neva Grant. I'm Guy Raz, and you've been listening to the advice line on how I built this lab.