How I Built This with Guy Raz - Guayakí Yerba Mate: David Karr and Chris Mann

Episode Date: November 28, 2022

In the mid-1990’s most Americans had probably never even heard of yerba mate, but when David Karr and Chris Mann were first introduced to the South American drink, they were hooked. Together with three other friends, they decided to launch a company that would bring mate to the American market. Based in San Luis Obispo, California, the co-founders of Guayakí Yerba Mate spent years living in a van and driving all over the country, brewing up free samples for consumers, and convincing natural food stores to sell their product. It would take almost 15 years of grinding away before the company turned a significant profit, but the founders were powered by a mission to do business in a way that supports communities and the environment. Today, Guayakí has annual revenue of over $100 million, and their canned and bottled beverages are available all across the U.S.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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It had tall windows, beautiful old details, and plenty of space for all of us. And being in that home on Airbnb, right in the middle of Vienna, walking distance from so much of the city, made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. Your place with all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca.com slash host. You are on the road setting up demos at any natural food store and trying to get people to try it, right?

That's a lot of work. You're right. It was a ton of work, and most people would never do that. They wouldn't live in vehicles for all those years. They wouldn't get along, their relationships. I mean, all those things. But the Mate was always just so much about bringing us together and bigger than any one of us. We actually had a lot of fun. I mean, it was a blast.

Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how five surfers in California bonded over a drink, most people didn't even know existed and how they built a hundred million dollar company to share it with the world. Building a brand is really hard, especially when the product is virtually unknown to your potential consumer base. This is why you don't see Americans spreading marmite on their butter toast in the

morning. Even though millions of British people eat it every day, it would take decades to convert Americans into marmite consumers. salty, bitter, brown, yeasty sludge is an acquired taste. So is a bitter, musty beverage called Mate. Now, if you're not familiar with it, Maté is the most popular non-alcoholic beverage in parts of South America. It's made by steeping the dried leaves from a Yerba Mote tree in water,

and it's usually served hot in a hollowed out gourd. In Argentina and Brazil, people usually drink it through a metal straw. Mate has a few organic compounds. Some people say make them more energetic or alert, a little like coffee but without the edge. Anyway, back in the mid-1990s, a group of friends in San Luis Obispo, California, were introduced to Mate by another friend from Argentina. And within a short period of time, they founded a Mate company they called Guayaki. Now, what they didn't account for was how difficult it would be to convince people to drink Monte. Let's just say it doesn't go down easy.

It would take them almost 15 years of grinding away before the company turned a profit, and much of those 15 years was spent on the road in a camper van, going from festival to festival handing out free samples. In fact, the co-founders estimate they've given away more than 5 million samples of Mate. A few years ago, they made a decision that would be both incredibly hard and incredibly smart, and that decision was to build their own distribution network. And how they did it? Well, we'll get there. Today, Guayaki Yerba Mata generates more than $100 million in annual revenue,

and their canned and bottled drinks are available all across the United States. You're going to hear from two of the five co-founders in this episode, Chris Mann and David Carr. David grew up in the hills between Santa Cruz and Silicon Valley. He spent a lot of time as a kid outside in the Redwood Forests. He ended up going to college at Cal Poly San Luis Obispo in 19. where he took business classes. But pretty quickly after he got there, he figured out that capitalism didn't really appeal to him.

So instead, he decided to switch to Cal Poly's foreign language department, which took him to study abroad in France. I really liked the challenge of learning a language. And I was always been like a people and a connector person. And I lived with a French family, French grandparents, really. And so they didn't speak any English. Wow. After like three to four months, it finally started clicking.

like I could understand what they were saying and I could speak a bit. And so I really liked that challenge. And then I also loved the area where I was living and I loved the cuisine and I loved the attention to like there was just a different pace of life. And I was really drawn to like sitting down and having a meal for two hours and talking and sharing a glass of wine, not to get drunk, but just to like socialize. And so it was for me it was a huge like awakening of like a whole different way of like living. Yeah.

based on what I had kind of grown up and experienced just on the West Coast. All right. So you come back to California to finish up your degree. You graduated in 1996, but I guess that was sort of two or three years after, right? Because you got to school in 1990. I started in 89 and graduated in 95. So I had two years abroad. And so because my experience in France was so good, I ended up going to another language school in Germany for a few months.

But then I moved to Spain and then again and lived with it. another Spanish family. Actually, it was two families, two nine person families. So I was like in this pack of like 18 Spanish people. Wow. And they didn't speak English at all. And so my Spanish actually became the best, even better than French. Yeah. And so I'm just sharing that because when I got back and when I met Alex at the restaurant later on, I did have a base of Spanish like enough to hang out and converse. And so I could basically, Alex could speak to me in his maternal tongue and be himself and express himself in his own humor and I got it. All right. So you came back basically with two and a half languages under your belt.

You're back in San Luis Obispo. And I guess you met this guy named Alex Pryor, Alejandro Pryor. Who is Alex? He was an exchange student in soil science. From Argentina? From Buenos Aires, Argentina, yeah. And we met both after we finished. Like I graduated 95 and so did he.

And he was working at a restaurant, local. and that's where we met. You guys just struck up a conversation in Spanish? Sort of, not really. He ended up spilling food on my girlfriend at the time. And so we ended up chatting it up, you know, because it was like, oh, my God. And then he liked us and he invited us out to have a meal, like a traditional barbecue, which they call a pariscia at his place.

He was living in a mobile home, like a little trailer on a fairly large property. and he was doing organic farming studies for the landowner. So we came out there, had a meal, and then after the meal is when sort of the moment happened, you know, when he passed around the traditional matte gourd. He finished a meal and he passes around this drink. Yes. Called matte. Yeah.

And tell me what was, what do you remember about, about how he sort of presented it to you? Well, I think it's just sort of a normal thing to do after you have a meal. you, if you want to connect with someone and you want to have a moment, you pass around a Mata gourd. A gourd. It's literally a gourd, a dried gourd, right? It's really, like, there's all different kinds of gourds. There's hollowed out, like, calabas, like, squash gourds.

There's ceramic gourds. There's metal gourds. They're basically a container, and you put a metal straw into it with little slits on it that create a little filter at the bottom. So when you put this straw filter in there, you suck through it. the small leaves and particles don't come through the little slits and you just get the liquid. And were you thinking, this is interesting? Like what?

Yeah. Well, that was the moment, right? People ask you like, what's that moment and the aha moment? That was the moment. Because I had suffered in my life from hay fever, straight up. And I had taken Sudafed and Benadryl, like drugs, to just be able to, like, stop, have my nose running. I just suffered a lot. I had humidifiers in my room growing up.

And I kind of cut all the drugs cold turkey because they just made me feel so bad. And the only thing that ever really made me feel great was like a lot of exercise. So I would, if I was surfing or mountain biking or doing like a two hour astanga yoga, which is a bit more of a vigorous yoga, something like that, I could breathe pretty well. And it took an investment of time to do that. Well, that day when you passed around the gourd, within like 10 or 15, minutes, I all of a sudden my nose cleared up, not completely, but like I was breathing and I was like, what is this stuff? Like how come I'm... You'd never heard of it before. Never heard of it, no.

I mean, the description, you see, you're like sort of saying, I felt amazing, right? But it wasn't like a high, right? It wasn't like taking mushrooms or something. It was it, describe how you like felt besides the fact that you felt like your nose cleared up. What else did you feel? Well, I felt the energy and the clarity of mind, too. Like, because Mata is a Vazio and bronchio dilator, so it gets your system flowing. So not only am I breathing now, then you have more energy and you have more clarity to mind. So those are sort of a byproduct or an effect of having a system that's flowing better.

All right. So you have this experience with it. And I want to be clear about this. Not everybody is going to have that reaction. And there's, this is not a science show. We don't have the data. But you clearly, it was like you loved it. There was something about it.

So did you say to Alex, hey, can I get more of this stuff? Like, I wanted to keep drinking this tea. I did. And he started sharing more and more gourds in me. We'd hang out. We liked each other, right? We had a real chemistry. Like, you know, we're passing around other green things at that time, too.

And this was like, okay, everyone who started drinking this was like getting the balancing effects from it. Like, we were all surfers and spending a lot of time. you know, driving along the coastline, staring at the waves, trying to find the best one, parking, checking it, driving in your car again, looking for that. So you're, so we all started drinking it and, you know, an hour into drinking the gourd. And then we'd go paddle out. And it was like, we'd all, everyone started saying they had the best sessions. Like everything started clicking. You know, you'd have, you'd be doing yoga on the beach, drinking your matte, get in. And so it just really like, like landed so well. And then people started quitting coffee. And that's what kind of was like,

Huh. This is really interesting. I guess this is a moment where we should pause and talk about Mate for a minute because when I was doing research on this episode, I was amazed to learn that Mate is like, it's not surprising. It's been around for hundreds and hundreds of years. I mean, it's been around for longer, but it was sort of first consumed by, you know, indigenous tribes in what is now Paraguay and around Argentina and in those areas. it's been consumed for like 500 years, but really never really made it beyond Argentina and Paraguay and parts of Brazil, right? Like what, so when you first had it, did you ask him? You're like, how is it that this thing is like only in this tiny part of the world? I did.

And the story that I've heard over and over is it was actually expanding like tea and coffee. And it was kind of, it kind of went all the way up into purview. Peru and different places. And then there was a war that happened between Paraguay, Argentina, and Brazil, and the trade routes broke down. And so then Yerba Mante never kept trading and going further away. It kind of stayed confined to that area, whereas tea and coffee continued to expand around the world with their trade routes. And I guess you could describe Mate as sort of having elements of coffee and tea, right? It's got, it's a leaf. It's a dried leaf. It's brewed like tea. It has some of the same chemical properties of tea, but also has caffeine like coffee. Yeah. I mean, it was used more like our culture uses coffee than tea. People used matte in the morning to wake up and they brewed it strong.

And even as we commercialized it, the first people to ever really get into matto were not so much tea drinkers because people would have like generally a cup of tea or a lighter cup of tea. or a lighter cup of tea, whereas they would brew the Yerba-Mate in a French press or a coffee maker and make a strong cup of Mante. So it was very much like you could quit coffee drinking Mote. Yeah. However, if you look at the chemical structure, and this was always very fascinating, you know, coffee was really had a lot of caffeine and so does Mate.

Tea had a lot of teophylline and then chocolate had thio bromine. And Yerba Mata has all three. And that was very much what I attributed sort of the unique sensation that people feel. from your Burmate, like, why is it so different than coffee or tea? Well, it's the unique combination of these alkaloids in the package of something that has pretty much the nutritional profile of like a wheatgrass. Got it. Okay.

From what I understand, like, most matte is commercially grown, and, like, it's grown on areas where there was rainforest. Rainforest is just, like, cut down to just plant these Matte trees. And they can produce a lot of Matte faster, but Matte traditionally was grown in shade. And Mate is not like teat, which is grown. It's like a low growing leaf, right? It grows close to the ground. Mote grows on trees, right?

It's a leaf from a tree. I mean, tea, like Mote, they kind of look like bushes, right? So they're both cultivated similarly for the ease of harvest. If you were to find a Mote tree in the wild, it would grow up like 80 to 100 feet tall and maybe be like 12 to 18 inches in diameter for bigger trees. But that is difficult to harvest. Generally, like for the mass amounts of production, they prune the trees down and they make them in more like bonsai trees, like the size of an orange tree and get on step ladders and trim them.

Like a teabush. They're probably bigger than tea bushes, but similar in size or shape. So at what point did the idea come into your head or into Alex's head to maybe turn Mate into a business? I mean, you're like, what do you, what was the conversation you remember? Well, we were becoming bros, right? We were hanging out a lot. You guys were bros. We were bros.

We were surfing and doing taekwondo and drinking Mote. And at one point, he was asking me for advice and we were talking. And he said to me, he's like, the door is always open. I'm like, what do you mean? He's like, we could do this together. And at that point, he was putting half pounds of Mote together in his trailer with a tinty bag and selling it at one store in San Luis Obispo. So he had it in one co-op store.

And he'd make a couple cases and sell it. So I started doing that with him, just helping him, actually. I wasn't even joined with him yet, but I just would hang out and talk with him and pour matte into the bag. That's what we were doing. I was kind of just volunteering my time. And would they call it, would he be calling it like Alex's matte or was there a name? It was called Guayaki from the very beginning.

It was called Guayaqui. Yeah. Wow. Tell me about that name. Well, the name came from our, where we, all of our matte originally came from Paraguay, from an area of rainforest that was part of like an experimental project. to reforest Mate in its natural habitat.

And Alex, through his dad, who knew the landowner when he got this Yerba Mate in his hand and started drinking it, he was also profoundly affected. He was like, man, this stuff tastes really good. It's nothing like the Yerba Mote. He grew up drinking because all of them

all just drank commercial sungrown matte with chemicals. That's all you can get. And the name of the reserve where the Mote was coming from was about 25,000 acres, was called Guayaqui. And so then Alex just used the same name

and we just would throw Yerba in the sack and that was it. And this Mata was different because it was essentially grown organically. Organically in the shade, smooth tasting, better flavor, all of it. And so he was like psyched on it

and he was, it was also, I think, if he shared it with people, they liked the taste better because if you drink the Argentine stuff that's sungrown, it's really like almost offensive unless you grew up drinking it.

It's pretty bad tasting. And for me, that was when my business brain clicked back in. was kind of like anti-corporate. Like, I don't want to be part of something that's not good for the world. And when I learned that this year, Bermate could be grown in its natural environment

and produced by small farmers and indigenous people, all of it just sort of added up to me. I'm like, wow. And like, the more we could scale this and return, like, destroyed lands back to forest would be great for the world. I saw, like, the power of this product to drive real change. And that's what got me in.

All right, I'm going to come back to you, David, in just a moment. But I want to turn to Chris for a little bit. Because, Chris, I know that you grew up in Southern California. And I think, like David, you also loved the outdoors. And I read you were a high school athlete and a super smart kid. I know you studied economics at Harvard. And then you went into finance after college, right? But from what I understand, you had to just were not happy with the path you were on.

So you sort of quit your job, which is around the time you guys met. Tell me about that. Where were you when David and Alex met? What were you up to? So I at the time was living in the Bay Area. My wife was getting a degree, a master's degree in holistic health. And I was trying to figure out my next, what I wanted to do. I was waiting tables basically just to make ends meet pay rent, but I had a lot of free time.

And both my wife and I, we were just diving into like all kinds of reading and learning and, you know, a lot of Eastern thought. and just really, I think, grappling with, like, who are we as people and what do we want to do on this planet? And I think the more I, you know, moved away from conventional mentality, the more it allowed fertile soil for these other seeds to grow. So, all right. So you're going through this kind of personal transformation. How did you end up in San Luis Obispo, which is on the central coast of California? So two of my high school friends were very passionate about macrobiotics and we're going to to Cal Poly San Luis Obispo, and as part of their senior project, they were opening a vegan restaurant

in San Luis. And they were living in a house that they had converted the whole front yard into a living garden and into really like a food forest where you had mixed trees with different herbs and shrubs and vegetables wasn't just like planting things in a line. So it was really kind of an early version of permaculture. And so I lived there and the way I felt eating the food changed my body. And then on top of that, we were connecting with all these local farmers. And so seeing the connection between the food we eat, how it impacts the land, how it impacts the community, how it impacts the health of the body. And it was like, wow, we really need to focus on building something here. All right. So you're working at the restaurant, helping your friends out.

how did you meet David Carr and Alex? Yeah, so I met both David and Alex through the restaurant. We officially opened, I think, in mid-1995, and around that same time, Alex was living on a farm, and that farm was where we were sourcing our subtropical fruits for what we called our forager bar. So we had basically a giant salad bar, but it was all kinds of different fruits and vegetables, many of which were locally foraged. Wow. So Alex came in.

He knew about the restaurant and he thought it would be a great place to sell Yerba Mata. And shortly thereafter, David became a customer. And we met and really hit it off. And, you know, David is such an incredible person. I mean, the moment you meet him, you really kind of light up. And at one point, you know, he was like, oh, you should come by my place and we can play some music or something else. I was like, oh, that sounds good. When's a good time?

And he was like, anytime. I was like, wow, really? Any time? And he's like, yeah. And when I did go to his house, that's when we first shared Mate out of the gourd. And that's when it really got me, you know, and here is something where it's very intimate you're sharing. And so, you know, you naturally start having these incredible conversations and dreaming about the future. And so, you know, so much of how I think about, David is just so tied to that. All right. So you guys start to form a friendship. And David, I mean, you and Alex, start to really explore turning this into a business. And I guess at a certain point, you wanted to formalize it. You were like, let's file an LLC and set up a company properly. Tell me about how you even started that process. Well, that's even a more funny time because the way we first sort of ceremoniously celebrated our relationship was he gave me a silver wampa, which is a bullhorn that's silver-plated on top and a drinking vessel for Yerba Mata. So he gave me one of those as like a symbol of our friendship and connection.

Alex did. Alex did. And that was what I had for a whole year. That was the only thing we went on. But when we actually had to go like get some money, that wasn't enough, I think, for the bankers. So we did come up with agreements. But you know, that was something you gave to someone when you got married or a very special

time in your life. And so for him, that was the most important. thing was symbolizing our connection. All right. So, David, how did you go about, I mean, presumably you needed money to import the Mate. You needed money to buy the bags that you would then put the matte in and then labels to label them.

I can't imagine it was that much money that you needed to get this started, right? Because you were really selling to local shops. Yeah, we got a $50,000 bank loan locally. How did you get $50,000? our bank loan. Well, that's also kind of the funny thing about a small town in relationships, right? Because Alex worked at this Italian restaurant and the owners were friends with like the local bank and they made an introduction. And then Alex and I went in there and we told them about this whole project. I don't think they got it at all. Yeah. But they liked us enough. And they

loaned us the money. Wow. What kind of collateral did you have? Must have. Nothing. I mean, we had It's a Lucere Bramante, but, you know, that's what they first bank, the San Luis Bispos, that's what they did. They wanted to support local business. And I think a lot in a small town comes down to relationship and who you know and do you trust them. We had to sign personal guarantees, but there was no, nothing to guarantee. Yeah, I mean, that's kind of a crazy loan to give. I mean, you know, it's an unknown product. There's no market for it. You basically are going to them saying, look, we're going to create a market in the United States. We're going to educate people about this product. And if I'm a banker, I'd be like, I'd be kind of skeptical back then.

Well, part of it, too, was it was an SBA loan. And so the SBA guarantees, you know, I think 90% of the loan. And so it's really kind of like how it's designed to work. Yeah. But with all the banking consolidation, that's changed so much. Now it's all about the numbers and stats and everything else. Right. Because in the mid-90s, there were still a lot more independent banks than there are now. Yeah. If I recall, the president of the bank, was named Reese Davies. And he said, you guys remind me of the San Luis sourdough boys. And that was, and San Luis Sourdough had been a big success locally. And so that was it.

That's amazing. That's amazing. And there was another really big element to it. I mean, I think we had nine personal credit cards maxed. Chris and my brother, Stephen and myself, we got every, you remember that time? That was that time in the mid 90s. They just started sending everyone credit card offers. Yeah.

So he just like said, yeah. Yes to them all. And we probably, you know, probably had another couple hundred K just in credit cards and top of the bank loans that we did to like fund the business at that time. But initially, when you guys got together to start this, David, what do you remember about the ambition? Were you like, we're going to make this the next coffee? This is going to be the next massive beverage in the United States or was it more like, yeah, let's just see if we can get people to buy it in San Luis Obispo. Yeah, no, it was always a really big vision. And it's a little humbling to even talk, talk about it now. I mean, I remember

convincing my brother to drop out of university in Chico, what you did. Yeah, to do what he did. He dropped out of university. He was almost done. He had like a half a year left, but he was studying graphic design. I was like, bro, we need you. And he was living in Europe, kind of following my footsteps for six months. And I went out and told him everything that was going on with Alex and shared matthe with him and left him with a gourd. And when he got back, he was in. You needed a graphic designer for your logo and for your look. Everything, because we were like packaging and products and we were doing all that. We couldn't really afford anyone and none of us were taking a salary.

So we just needed sweat equity in there. And, you know, I remember telling him, I was like, we're going to be a billion dollar business in five years. You know, like, I was so, so jacked on this product. Yeah. Like, I didn't know anything. I was naive. I just thought it would spread it a lot faster. I didn't know anything about distribution or sales or lead time.

Nothing. I was just like human nature loves this stuff. and it's just going to be big. When we come back in just a moment, how the Guayaki team spreads the word about Yerba Mate to people who have never heard of it before and why their first big piece of media attention almost kills the company.

Stay with us, I'm Guy Raz, and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raz. So it's the mid-1990s, and Bayaki is starting to take shape as a company. Chris has now joined David and Alex and so is David's brother, Stephen. That accounts for four of the five founding semias or seeds of Guayaki. The fifth founder goes by Don Miguel, although his real name is Michael Newton.

Michael Newton and I became college buddies. He was also studying business, but we were just like hanging out surfing and playing music together, just bros. But like he was actually the very first one who started helping out, Alex and I, even before Stephen and Chris, because he actually ended up kind of joining as a quote unquote intern and helping drive up like the first eight tons of Yerba Mata from Los Angeles to Slowtown and the U-Haul that was rented and like, you know, having to like move all eight tons himself twice because this, I mean, the classic story, Del Miguel,

he's a workhorse stallion, always positive, you know, and so, you know, he was working with us early on. And how did you guys decide who would do what? Did you say, okay, you're going to be the CEO, you're going to be the CMO, you're going to be this. What do you remember about those decisions? Well, it might be a moment to talk about Alex's transition, David. Yeah, because essentially, like I said, we had a partnership there.

And when he was on a sourcing trip pretty early on, it might have been like in, what, 97? Mm-hmm. Back to Argentina. Yeah, because he's living in, you know, the Central Coast, right? But he goes back on a sourcing trip, and he meets his future wife, Floreencia, and things change for him too.

And so now he's kind of like, hey, we're sharing a gourd. It's a very emotional charge moment. So he basically says, give me 10 or 20% of the business, and I'll send you the Yerba. And I'm like, ugh. And just to be clear, he was telling you, Alex was saying, I'm moving back to Argentina. Yeah. I can't run this business from here, but I can send you the Mate. Yep.

And he did. Yeah. But he was the guy. Yeah. He was the connection to him. He was the Argentine. And continues to be my soul brother. I mean, later introduces me to my wife.

I mean, he's like my soul bro. And so, of course, what do you do? You love your friends. And for me, I never wanted to be just the guy. You know, I liked doing things with people and partnerships and friends. And so that was when we shifted up the equity structure. And then we distributed the rest of the equity to the four of us based on sort of responsibility that we had. So Alex moved to back to Argentine.

And that's it. He was sort of out of the picture on day to day. operations. For the next, you know, three to four years, it was more, he took another job as well. It didn't require that much of his time until we started growing. Right. It was one of those things that like it wasn't the right time for it, but ultimately it never would have worked had he not moved down there. Yeah. This is a challenging business that you started in 1997, really, in 1996 because you had to introduce a product to a market that 99.9% of people had never heard of. You had to convince them to try it.

And then you had to hope that they would experience the benefits of it enough to turn this into a sustainable business. But it's one of those products that you can't just like sell to a natural food store and hope that they're going to sell it off the shelves. It's the kind of product that you have to demo in a store, give it to people, let them try it. So presumably you're doing that in San Luis Obispo at this time. Yeah. So that kind of goes back to the original question of sort of how the roles and responsibilities broke out because now there's five of us. And Alex is now in South America, sending us here, and Chris is running the business, holding it all together. Domigel and Stephen and I, the three of us, get on the road as like full-time Cebadores.

And Sabadores, just to clarify, these are, it's like a barista of matte. Yeah, it's a traditional term for someone who shares and who prepares and shares the yeraba. So we are Sabadores. Okay. And we started doing that in Slowtown in San Luis Bisco at the farmer's market. And you were just brewing it traditionally just normally, no sugar, no nothing else. Exactly. That was the thing, right?

We had a very small percentage of people who could actually drink it because we are so hyped on our own Kool-Aid, right? We brewed it so strong in those purse. Those coffee percolators that would drip for like half an hour and then serve it to people at the market. And they would drink like this cowboy matte like straight and dark and strong like the espresso Oh yeah, it's just strong, right? And so people felt it. And some people were like, uh, not for me and they'd walk away like 80% of the people like they'd smell it. I can't do this or too strong or too bitter too much. But those who did were just like, hell yeah. This stuff was amazing. And so we kind of got that that whole feeling of it. We got we took that show on the.

road. Stephen and I, my bro, went into the north. Don Miguel went south, where he was from, Long Beach and did SoCal. Stephen and I would go together. We were living in my VW bus. Okay. And Dol Miguel had his truck, and he was more on his own. But then the three of us would come together for certain events, like some of the first festivals that were being started on the West Coast. This is back when festival culture really hadn't started yet. What kinds of festivals? Like back in the day, like health and harmony was like the first one on the West Coast. And then there was, Coachella and Bonaroo. And then there's all these like...

Tribal Stop, reggae on the river. So music was your... That was the tribe that you were going for, the people go into the festivals. It was kind of what we were into. Yeah. And if you're going to go to a festival, it was where younger people were.

And people wanted to stay up late to catch the music and they needed the energy because they were dancing. It just fit right in. Yeah. And then Stephen and I, after going all the way north and going all the south, ended up in L.A. And we're like, oh, my God, this is great down here.

was like so into health and wellness. And so we just like planted ourselves into Panga for like a year. But there was something that happened when we were down in L.A. That's when soy milk started getting popular. Yeah. So we started putting honey and soy milk in the matte and making matte lattes. And then like the percentage of like maybe 15, 20% of the people actually trying it and liking it went up to like 50 or more. People are like, oh, this is great.

I can drink it instead of my coffee now. I can drink a Mote latte latte. This is before Whole Foods really blew up. So you were going into mainly independent health food stores, co-op type places. Yeah, like the Santa Monica Co-op and then the Whole Foods. But also we were at that era when you could actually just still go in and talk to a Whole Foods buyer and get them jazzed on it and they would take it in. So that was how we did it. In a store, yeah.

You'd walk in with a bag of Matta and say, what would say, can I talk to the buyer? We had the same strategy the whole way along. We said, look, if you let us come in and demo our product, We'll sell you the product on consignment, and you can just basically sell whatever you want. We'll take the rest with us. But what inevitably happened was it was like a top selling product in their store and they would take us in. And then we would basically, when we're on the road, we'd call back to Chris and be like, hey,

send out a few cases to this store. And then we'd ship it via UPS for like for the first four years. We shipped product out direct to stores via UPS. I got you. So you would get these big, big sacks of Mate. you guys would hand package it yourselves. You know, at that point, we weren't hand packaging. It was being hand packaged,

but we were working with this group called the Achievement House out at Quest of College, and it was a group, adults with disabilities. They did all the loose packaging for us. And then we also had a tea bag, co-packer we worked with who put it in tea bags. Right, because I imagine that selling loose matte was not going to go very far because most people are not Mate baristas, right?

They don't have the gourd. And so a tea bag probably made more sense practically, right? Yeah, for most people. I mean, that was definitely, we sold more bags than loose. I think in the natural foods industry at one point, our bags were the number two selling tea. And the loose was like number six. So, I mean, they both did really well relative to that market. All right.

So, David, you and your brother are near VW bus. And Don Miguel is going down to SoCal. Chris, you're manning the headquarters in San Luis Obispo. This would be like five, six, seven years of driving up and down the west coast of the United States, setting up demos at any natural food store and trying to get people to try it, right? Correct. That was like until 2003. Then we started doing cross-country tours. You know, that was when we had to get the bigger vehicles like the RVs. I can't imagine how, I mean, that's a lot of work. Because there's a business to run based in San Luis Obispo, and you are on the road, what? I mean, we did some tours that were just eight months long or six months long.

We would just go. And I think Stephen Dol Miguel and I personally served over five million cups of Mote. Wow. Like we spent a lot of time architecting how to get as much year bar Mote in people's hands. And then that was way easier to scale with cans and bottles as we grew. But in the beginning, with Luce, it was very challenging. and required a lot of preparation and a lot of breakdown. But the advantage was when you serve someone a really strong hot cup of

matte or a hot matte latte, it was definitely even a little bit more impactful than just drinking a can. Yep. But to do that person by person by person by person is very hard. It wasn't like you had a $40 million marketing budget to take out billboards in Times Square and every bus in Los Angeles. You couldn't scale this thing. It was like, you know, one at a time. That's a lot of work.

You're right. It was a ton of work and most people would never do that. They wouldn't live in vehicles for all those years. They wouldn't get along. Their relationships. I mean, all those things. But the Mate was always just so much about bringing us together and bigger than any one of us. We actually had a lot of fun. I mean, it was a blast. But this is my question, David. I, you know, I think anyone at the beginning of their career, it's a grind. But you're doing this for a long time. You never got down. You never felt like, God, this isn't taking off as much as I had accepted. expected or as quickly as I expected it to. Well, I definitely felt that. I definitely was like thought I would take off a lot quicker. And that wasn't demoralizing? It didn't get you down? It was never a grind. That's amazing.

How? How? I loved everyone I worked with and we loved getting together. And when we got together and shared a gourd, it kind of got to the point where it didn't matter how big or how fast. What mattered was like survive until you thrive. Chris, you are in San Luis Obispo. You see the numbers.

You know, we're talking 2000, 2001, 2000, 2003, four, five, that it's not profitable. Were you as optimistic as David and those guys? Were you like, yeah, this is awesome. Or were you ever stressed you had a kid? Yeah, well, I think a big part of my role is balance as well. And the way that I looked at it was like, this is going to happen, but we don't know how long it's going to take. So let's try and build structure that can last a long time. And so, you know, if you go back to, as David mentioned, we got an SBA loan.

We got a second SBA loan in 98 maybe. And then like a 200K SBA loan in like 2000. So maybe that was total of like, you know, 350. So we didn't have any equity that we had sold or anything. And so we really were like, we really want to be super frugal and like do this in the right way. So we don't have this outside pressure trying to drive us. And if it takes 25 years. or if it takes 50 years or it takes 100 years, like, let's figure that out.

No, I love that. I love that you had that patience and that optimism. I love that, but not everybody would stick with it. And the business would not become profitable, I think, until 2011. So you're talking about 13 years of unprofitability for a consumer brand for a drink. I can't imagine that's not scary at certain times. So we, you know, we were profitable. early on because we weren't paying ourselves.

We were, you know, basically just covering expenses and whatnot. And we were shipping via UPS. You know, we weren't making much, but we were sustaining ourselves. When it started to change was then all of a sudden it's like, okay, now we've got a national footprint. We need to bring in the national sales manager. And now we need a broker network. And now we need a distributor.

And you start seeing, you know, all those costs add up. And so you're right from like probably 2004 to 2011, we weren't profitable. But we were always close. You know, and so what we did was we started bringing in equity capital, but always from friends and families or angel investors. And so I ended up spending a lot of my time over that period of time raising money because we never went out and said, we're going to raise $5 million. It was like, okay, let's raise $250K. Let's raise another $500. And that way we were able to, you know, minimize the dilution, bring in the right, you know, at those smaller numbers, you can really find people that are really believe in the mission and vision and will stay with you long term. and many of them are still investors to this day.

What about media attention? I mean, you know, part of this is you can explain to people what Mata is, just word of mouth, but that's not enough. This is a very specialized product, especially in 2001, two, three, four, five when you're starting out. Were you trying to reach out to press to get them to write about it? We did have a big media success in 2003 that actually led to our first near-death experience. What happened? So we were on the cover of this magazine called Women's World that was on, you know, at the checkstand of every grocery store across America. And it said South America's secret weight loss tea.

Oh, wow. Because Yurba Mote is known to suppress appetite. And so it's used in a lot of weight loss pills in Europe. And so that headline came. We didn't know about it. All of a sudden, we just started getting calls and we started getting orders. And I remember it was like September and, you know, our sales doubled from the previous month. In October, they triple.

from the month before that. November, they tripled again. And then all of a sudden, December, they stopped. And then January, we got nothing. February, we got nothing. And we had this like, oh, shit, moment. Like, what is going on? Yeah.

And what we found out was it was like a weekly. So it was out for a week or two weeks. And then the next thing came on. So everyone wanted it, but for a very short period of time. And the whole infrastructure, the retailers were ordering it. So distributors were ordering it. it and then we were making it. But by the time the retailers didn't need it anymore, there's such a lag that we didn't know. And so there was a glut of inventory. And that's why we weren't getting

sales for those next few months. But the other thing was they bought it all on consignment. I took the calls like from vitamin shop and GNC, I think it was. And I was like, oh my God, this is amazing, exciting. You say yes. And you're like, cool, sign the document. But it was consignment. I think only GNC was. Yeah. But a lot of it came back. And the second irony to that was we had a major cash crunch, but we had a second piece of PR as well. And David ended up being on the cover of Money Magazine at this point, talking about how successful we were and how great everything was going. You were on the cover of Money Magazine? Yeah. When was this? It was like right after it, that was kind of embarrassing too, because Money Magazine was not a big deal to me. In fact,

I was kind of against like a lot of like just traditional corporate behavior. But it was an article on social impact. Okay. It was me and a few other people. Anyway, that led to our first significant investment that actually came in at the right time. One thing I just want to reference is we actually did not lay anyone off through that experience. And I bring it up only because it was a big decision and it was kind of formative to how we grew. We decided that everyone would take a pay cut rather than lay people off. And so the semias, we took the biggest pay cut, but everyone took a pay cut. How many people were working for the company at that point?

I think we had about 15 or 20 at that point. And when you were on the cover of Money Magazine, David, I mean, you guys were maybe three, four million dollar company. You were pretty small. I think that was about right. Yeah. Yeah. Yeah. All right. 2005, a couple things happened that year. You move your operations to Sebastopol, California, which is where I think your main headquarters or one of your headquarters is still located. And by this point, David was in British Columbia because he fell in love as well. So you moved up to British Columbia. Yeah. Wow. Okay. and that year, you start to sell bottled Mate.

And you brought on a new head of sales who had worked for Coca-Cola, a guy named Pierre Ferrari. So a lot going on that year. Well, to rewind a little bit at a Bionnierers conference before that, I had met Ben Cohen from Ben and Jerry's and gave him a sample. And apparently he tried it on the plane and hated it, but he was impressed enough with our business model that he had one of his people reach out to us.

And it turned out when they sold to Unilever, they created two small venture fund, two five million dollar funds, one run by Pierre Ferrari called Hot Fudge and one run by Chuck Lacey called Bardrock. And so they were both our first bigger investor, bigger meaning they have each invested like $150,000. Yeah.

And they were both on our board. And so that's how we got to know Pierre. And so he had previously been the head of marketing for Coca-Cola, but he was also very much into social justice and was invested in a lot of different interesting companies doing fair trade clothing and whatnot. So it was a real natural fit for us. Yeah, because you were a fair trade company from the get-go. So when we started,

fair trade wasn't really a thing, yeah. A thing. But in spirit, the whole idea was that because Mante natively grows in the rainforest, we can use it as an economic driver to steward and restore rainforest and be able to partner with the communities that live and rely on that forest. But from the beginning, that was the way that we operated. And so as Fair Trade became a more legal entity, that's something that we've got very involved with and very committed to. I guess it's important to mention that, like, something like 90% of the Mate grown is controlled by like three or four big companies in Argentina, right? So I think the growing is a little more complex than that, but it's a very consolidated.

And as a result, most of it is not grown in a sustainable way. Is that fair to say? Yeah. It's like, you know, virtually all. sun-grown matte and any shade-grown matte that exists tends to get blended in with the sun-grown mate. So it's all essentially sun-grown matte. And you wanted to just sell shade-grown matte? Yeah, our belief not only because we felt like the highest quality mate came from the rainforest, but just intuitively because that's where it natively grows. And it also is the, you know, what makes the whole business model work. We call our business model market-driven regeneration. And the idea is that through the market, i.e. customers, people believing in our product,

they will purchase a product that then drives the growers to be able to regenerate forests, be able to steward and store the forest they have. So it's this whole market-driven regeneration concept. So it relies on rainforest mate. All right, 2005. That year you also start to bottle matte and sell it in glass bottles, presumably because, I mean, this is kind of the beginning, I think, of like, the natural tea boom, right? There had been Snapple in the 80s and 90s and Arizona iced tea, but this is like, you're starting to see honest tea on the shelves at this time.

You're starting to see, like, unsweetened teas. And so was the thinking like this is the only way to grow? Yeah, for sure. I mean, there's a combination of things. One is with the loose and bag market, we realize just in the United States, it's just a pretty, small market. You know, statistically in United States, it's like 75 or 85% of tea is consumed cold. Plus, David and Stephen and Don Miguel had spent so much time making matte lattes and making matte tastes so good. People loved it, but they would always say, we can't make it the way you

make it. And so we felt with a ready to drink, it gave us the opportunity to make it the way we wanted to make it and then be able to share it much more broadly. Yeah. The one other thing to add, And after we had that really crazy cash crunch situation of having our sales really decline through our classically our strong months, like the fall, winter and spring when it was cooler out and people would drink hot beverage. And now we're entering like the desert, the dry season, right? Hot weather. So Chris and I and Alex and crew at that point where it's like we got to come out with

something cold. We need to be a four season business. and because we had the relationships in natural foods and because it wasn't that big of a stretch to find like a bottler, produce 100,000 bottles and put them in the stores where we thought they would do well, where we had a customer base is kind of how we started that business. And at the time, it was glass bottles. And you were insistent on because glass bottles are clearly recyclable. No matter what anybody says, plastic is not recycled. Like 90% of plastic in the U.S. is not recycled. glass is very recyclable, but it's heavy and it breaks and it's riskier.

It costs more to ship, which is why so many beverages are in plastic bottles. Did you at all consider plastic? I think in the beginning we didn't consider plastic at all, partly for the environmental reason and partly just because we felt like from a health standpoint, you know, the plastic, you kind of get the leaching effect and whatever. And the cleanest way to drink something would be out of glass. flash forward a couple years when we were, you know, looking at how do we expand our reach? And we did consider plastic at that point.

But ultimately decided plastic didn't make sense for us. And we opted to go with aluminum cans because we felt like it's the best out of those three containers because it's so energy efficient to recycle. Flash forward five, ten years and everything's in cans now. Yeah. Okay, here's a thing. Making a drink, it's a great idea. But then getting it into the hands of consumers is a nudge. another thing. From what I understand, if you're not in convenience stores, it's really hard to

scale it. Like, you've got to be in the corner shops, right? You can't just be in whole foods. You can maybe be a $8, $9 million business if you're in every whole foods. But beyond that, it's really hard. Yeah, that was our experience. Yeah. So for the first really year and a half, two years, it was just natural foods. Yeah. And so I think to your question guy about convenience, that was kind of the next area. And we knew to do that, we were going to need a direct store distribution, a DSD. And at our size, it was going to need to probably be a mom-and-pop type of operation. And so we reached out to people in our network that we knew.

And in particular, Blaine and Seth from Honesty were really helpful. And they introduced us to a couple of their early distributors. One was literally a one-person show based out of Berkeley. And so that was our very first distributor. And we just started going up and down the street and selling into stores, right around UC Berkeley. And then we got a second distributor that was up in this area. And then we added one in Pacific Northwest and kind of just went like that.

Yeah, I mean, I'm curious. Were you surprised at how challenging that whole thing was? Because you can get a distributor, but some of them are very small. And then you don't necessarily have control over where they're placed in the shelves. Is that what you discovered? Yeah, I think you're such a small fish in that pond. Yeah. Just getting space on the truck is hard.

getting attention from the root salespeople is really hard because every month you have companies coming in and just laying huge stacks of cash on the table and saying, you know, every account you get, we're going to pay you 100 bucks. And that was never the way we operated. And, you know, kind of a funny related story. One time our LA distributor, I wasn't doing the presentation, but the person on our team that did it, they had to follow body armor and body armor brought in their new investor, Kobe Bryant. Yeah. And so that was just the constant challenge because there was so much money in the industry and people were paying to get the placement. And we wanted to really make sure we earned it. Yeah. But one other thing is, you know, we also had this insight that, and I think

Pierre actually came up with this, was that we could either be a gentle rain, meaning that we can spend a little bit of money in market nationally, or we can create thunderstorms. And the idea was like, let's focus really tightly geography so that we can really make an impact. And so that's what we decided to do. We put all of our money into sampling and everything in the West Coast so that we could really have an impact there and people felt us. I'm curious about a moment in the company's history. 2009, from what I understand, the brand is available, the bottles still. You're not quite yet in cans, but you're in 6,000 stores, which sounds like a lot. You're reporting about $10 million in annual sales. So you've been around since 1996. So what, 13 years later, you're still a

very, at this point, a tiny company or small business, you were still losing money. Was this a kind of an inflection point? Was there any moment where you're thinking maybe we won't be sustainable, Chris? So there were always worries. I for years, I mean, was managing cash flow so tightly. I mean, we would certainly, David, Stephen and I missed payroll, you know, more times than we we would like to admit. And at the same point, you know, we saw friends companies that were, you know, just hockey sticking and it's like, wait, we're getting left behind. But there was never a long-term concern. It was always just short-term like, okay, how are we going to get through this valley?

How are we going to get to the next peak? How are we going to make this work? We joked every year. This is going to be the year of the year by. This is the year. Next year is the year. When we come back in just a moment, how Chris, David, and the team finally make it work and why they decide to start a second massive venture,

building their own distribution company. Stay with us. I'm Guy Raz, and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2009, and Chris, David, and the rest of the crew have been grinding for over a decade. Gwai'i Kee has yet to really take off, but they aren't even thinking about giving up. Although it's clear some of their competitors in the beverage space seem to expect that they will. you know, I was getting a lot of calls in like 0405-06 from people that wanted to buy Guayaqui. And some of them, what they said was, you know, we just know that about seven years people get tired and we're looking for a deal.

Like we're hoping that you guys are kind of burned out and we can grab it. But then in very end of 2005, so almost like 2006, we launched the beverage. And it was almost like we were a startup now. And so it was really much like a second wind. So if you think about being in 2009, in a way, we're only like two or three years in on the beverage business at that point. But we knew that we needed to reach more people. So our thought was we wanted to come up with a product that had a more simple flavor profile that would really resonate with a wider audience and that we could then go more into convenience and really be able to grow.

And so we did raise a little bit of capital again. And at the end of 2009 is when we formulated the lemon elation in the can, did a test launch in San Diego. And then later in 10, we came up with the other two, the Revelberry and the Enlightenment. Think about everything was, it's been such a long journey. Everything was relative. Like, it took so much energy and time to, like, make matte-lates on the road. There's honey stuck on the floor and on your clothes and, like, plants and like, yeah. And then all of a sudden, we have bottles.

And they're like, great, they're awesome. They can't quite scale. But now people can actually drink it just by cracking it open. And it was this whole like, oh my gosh, and that was exciting. But when the cans hit, it was a whole other thing, right? It was like another generation of consumers. All of a sudden, young people could use this product in place of all the other canned drinks. And now we're starting to build like around 2011.

So it was a whole renewed sense of like optimism and like, wow, okay, this product can do it. Did you, Chris, at any point in the period where you weren't profitable and you had outside. companies coming to you. And I'm sure they were saying, guys, I mean, Coca-Cola bought honesty, right? There's all this consolidation happening. I'm sure you were getting the same pitches. Like, you're just not going to make it as an independent company. You've got to be with a bigger player, but we'll respect your values and you guys can run it just as you want to run it and we'll put an infusion of cash in. That never, ever sounded tempting at all. No, and I think, you know, something maybe I didn't highlight before in talking about, you know,

what also motivated us is for us, it was never about the money. It was about the mission. And at the same point, we very much felt a responsibility to the growers. Yeah. Because, you know, they were relying on us. And especially as we did grow and we're buying more and more Mata from them, you know, if we partnered with another company, they weren't going to get it. The press releases are always so positive. And then a year or two later, at most, the founders are out and the company's doing

different things. And in fact, I was on a number of panels at different like investment conferences and stuff where I always represented because when we raise money, we raise. it with no exit strategy. And typically that's the first question investor has is, well, how am I going to get my money back? And we would say, we're not sure. We're not ruling out selling, but it's not something we're focused on. We really want to grow this for the long haul. But we just felt like that was a much more sustainable business for us. And it allowed us to grow slower and kind of figure things out. Had we grown fast out of the gate, we wouldn't have figured out the bottle or the can.

We wouldn't have had those products. We probably would be owned by someone already because it seems like the faster you grow, the faster you kind of hit that plateau, whereas if you can grow slower, you can really find your market and not buy your market. And we wanted to create a legacy business that was alive and thriving beyond us. That doesn't preclude us from going public. It doesn't preclude us from partnerships. It doesn't produce anything. But it does mean that we need to partner with the right people at the right times and make the right moves. And it's interesting that like you referenced honesty, which has just been announced by Coca-Cola, that, that it's going to be discontinued by the end of 2022.

So that brand is no longer a legacy business. It'll be a tombstone. And it's like, okay, it was a good run and that's great. But we see beyond that. All of us have come together for reasons that we felt like the current paradigm of business and capitalism isn't serving people the way it needs to be served. It could be done better with more interest than just the stakeholders are just the people that own the stock. And so that's really the driving force behind a lot of our decision. making.

Hmm. All right. So in 2010, right, you've got the cans out into the world. And by 2011, you actually have your first, I think your first profitable year, 15 million in revenue. Yeah. And then a few years later, you do something that I think is really interesting because I've almost never heard of this. You essentially decide to create your own distribution company. And before we get to how you did it and what you did, right, help me understand why you even started to think about doing something like that.

that. In around 2014, we weren't national. And we were at the stage of growth where, you know, we were approached by the big beverage companies and could have been on those beverage trucks. And had we done that, we probably would be two or three times bigger than we are now, but we also might be that size and getting canceled, you know, or we might be not involved. It might be a product that we didn't, don't feel good about. And so at the time, we thought, what are other options? You know, we could build out this third party network with a whole range of independence, but we knew a lot of people that had done that. And it's, you know, you have like 200 distributors and, you know, hundreds of employees. And it's just so much to manage. And no one

cares about your product as much as you do. Yeah. And so we thought, why don't we try it ourselves and see how it goes? And the other big appeal beyond what Chris just shared, you know, sort of the lack of control of destiny was more the potential control of destiny with our own vehicles. In other words, we wanted to have the energy of our brand translate through our drivers and the in the relationships that would occur at the store level and have way more visibility into that relationship. Like, okay, you have a great relationship. Maybe you can get a cooler in there. You have much more reporting over what's happening at the flow through and a much closer connection to the retailer and then ultimately the customer. Because we always had that vision of like seed to shelf,

like all the way from the Yerba Mante tree to the shelf, ultimately would be a great way to steward the product all the way through. Well, let me ask you a quick question before we get there. I mean, let's say you did partner with a large, a distributor basically is a company that has the trucks that you load your product on and then they drive it to the store and then they put it on the shelves of the store. If a big company came to you and said, hey, we want to distribute your product, how would that affect your values?

I mean, you say now that you might have been even bigger than you are now had you done that deal, but how would that have been a compromise? More so a compromise from a business standpoint, I feel, because, you know, if you go with one of the three big companies, you're with that company. They make their money off of carbonated soft drinks. Yeah. And that's what dominates the shelf. That's what dominates the truck. If you're Coca-Cola and you own Coke and you own Diet Coke, your margin on that is through the roof.

And so there's a limited room for other products. on those trucks and they have to really perform. But a lot of times when you're building something, it doesn't perform out of the gate. It takes time to build it. You know, I think we have seen that with other companies when they've been acquired by one of those companies and they get on those trucks

and they just can't meet the volume thresholds because it takes time to build. And so then you start trying to discount and move quickly and that's where it really changes the way the business is run. All right. So 2017, you guys decide we're going to build our own distribution network. What literally does that mean? Does that mean you have to buy your own trucks, hire your own drivers?

Because that's a different company. That's a logistics company. Did you essentially have to start a brand new company? Yeah, it was a new company that was started. And to be fair, it's not David and I that built that network. We started a separate company in LLC out of Jacksonville, Florida, with a separate team that ran it and built it. And from the beginning, the idea wasn't for it to necessarily be a national distributor. it was to fill in all the gaps where we weren't

because there's a lot of places in the country where there aren't good third-party options. It's either going to be one of the big three or like an Ann House or Bush. So, all right, over the next, I think, two years, you started to buy Chevy Bolts. This was going to be your fleet. Great electric cars, very small.

Yeah. Eventually you would buy 300 of these. I think you're the biggest customer of Chevy Bolts in America. First of all, how do you fit enough product in a Chevy bolt to get it to enough stores. Well, Cooley, after a year, they developed one based on our feedback, and so they took the back seats out, put additional suspension in, had a cage.

But our model was very modular. And because we started out going after markets where, you know, that were new markets for us, where we were in natural food stores, but we didn't have any convenience distribution, it was very small, small scale to start with. And so it was just starting from scratch, basically knocking on doors, opening accounts, making it happen. And so, you know, a small vehicle that could hold 60 cases was sufficient in those areas.

You know, in Wyoming, we might only have one vehicle, for instance, one person, one vehicle. But as the model shifted and we started taking over more distribution ship and as the sales grew, then that obviously became a huge limit. Our belief was that, you know, within two years, there would be electric vans and trucks, and there aren't. Right. With this distribution system now that you start in 2017, first of all, how did you finance it? I mean, 300 vehicles and 300 drivers and a team to manage that.

And, you know, how did you finance that? When we started it, we were able to self-finance because we just started, you know, I think our first market might have been Jacksonville. And that was, you know, maybe three or four cars we leased, three or four people. And then, you know, as we started adding markets at a certain point, It outgrew our ability to fund that cash flow. And so we needed to raise some capital. So 2019, end of 18, end of 19, I think we raised about $30 million.

And most all of that went to, all of that went to distribution. That was purely 100% distribution. All right. Here's a question. And I think it's a fair question to ask because you are focused on restoring parts of the rainforest. I know you're very committed to trying to finance the restoration of, like, two million acres of the rainforest. But, you know, how do you guarantee, given that you're not in Argentina or Paraguay or, you know, or Brazil, how do you make sure that's the case? How do you

make sure that the farm workers are treated well? I mean, because your values are so aligned and so tied to that idea, how do you make sure that you're not getting the wool pulled over your own eyes? Yeah, well, I mean, that is what our South American team focuses on. We have, you know, dozens of people down there on the ground in each country. Paraguay, Argentina, and Brazil working with the communities that we source from. Like, there's no broker. And that's probably one of the biggest distinguishing factors between Guayaqui and other businesses. Like, these are relationships that people have cultivated over more than two decades now. And to your point, Guy, I mean, we have,

we have uncovered a lot over these years because we've always invested in having a team down there. And I mean, we had an example where we were paying a cooperative who had a number of growers, and it turned out that the cooperative wasn't paying the actual growers. But the growers thought that we weren't paying them. So then our team had to go grower by grower and connect with them, explain what happened, carry cash through the countryside and actually pay cash to ensure that this was happening. And so building that team down there is critical. We have offices in Paraguay, Brazil, and Argentina, and we have a full processing facility as well in Brazil. I'm curious about the five founders who are still actively engaged in the business.

You're all distributed. You all live in different places, right? Stephen and I are both in Sebastopol, but yeah, everyone else is somewhere in a different place. And how do you guys make that work? Do you get together regularly, quarterly? Yeah, we always have. That's been part of the beauty. How often?

Oh, we're together several times a year somehow, usually around surf trips or work gatherings. I mean, I think for, you know, a lot of it, it would probably, be, you know, 10 times a year. Obviously, during COVID, that's changed a bit. But we all travel and we meet where we are. But the other factor is that some of us have always been a part throughout the whole journey just because of the nature of being on the road. And so we've gotten really good at just communicating and just because we're so connected to the mission and vision, you know, even when there's times when we haven't spoken, when we get back together about something that we haven't talked about, like 99% of the time we're completely aligned on it.

How many employees do you have now? I think somewhere around $450. And that includes the distributors. Yeah, the majority of that would be the distribution business. David, you mentioned earlier that this can be a billion dollar business one day. Mate, as a whole, from what I understand, is closer to a 300 million global business, and that includes all Mate around the world sold. And you guys now are about a third of that.

How big can this grow? Well, I think it can grow to be any size that a beverage company could grow to be. And it really comes down more to execution than anything. And, you know, if anything, I have more faith in that than I ever had before, especially because we're, we're part of really driving forward this regenerative movement. We want all kinds of businesses that are stewarding, you know, the planet and taking care of people. We want those kind of businesses to be successful to do just that. And I think for us, you know, we had a big reset in 2020. You know, COVID hit us hard and it was a moment for us to reflect and say, you know, what do we really want?

Do we sell the company at this point? Do we want to bring in other partners? What do we want to do? And I think David and Alex and I were like, we do feel like we need to bring in the expertise to be able to take this to the next level. Because, you know, we got to $100 million without Costco, Walmart, Amazon, any of those big retailers that are usually a big part of it. And I think we're just engaging with them now, you know, as we hit like $150 or so.

So you're not in Costco or Walmart. or any of those places yet. We just, I think we just started in Costco this year. I'm wondering, I mean, as you now approach 150 million in revenue and start to get to the bigger stores like Costco and Walmart, you're obviously likely to grow more and more. You're not ruling out selling your company one day, but it's not something that you can imagine anytime soon. Yeah, and too, I think going back to the scale conversation, you know, one of our competitors

is owned by Pepsi and they're on the, Pepsi trucks and they have unlimited distribution, but it's not really working. And I think it's because it's just premature. You know, the market's not ready. There's not enough customers that know about it. So I think for us, we can make the decision that feels like it's right for the brand over the long haul. And so if that means going public, then that's a path.

If it means partnering with a bigger company, then that's a path as well. But there's nothing on our agenda currently. Hmm. When you think about the journey you took, I mean, this is basically a company started in 1996. 97, took a long, long time to reach $10, $15 million in revenue, you know, 13, 14 years. And now you are where you are, easily the biggest Mirabamate brand in the United States, one of the biggest in the world. There's not been an easy path.

And I understand that you've enjoyed pretty much every minute of it. I think that's amazing. But it doesn't take away from the fact that it was hard. How much of that do you think has to just do with the hard work you put in the years of driving? door to door the setups of making millions of cups of matte, what you did and how much do you think has to do just getting lucky, you know, the natural foods business and industry kind of coming up and whole foods expanding and people becoming more aware of natural foods. What do you think? So I'm an incredibly grateful person, and so I could easily say it's all luck. I think luck is more

of the accelerant, and it's the work that I think links those lucky moments. And in some cases the luck, maybe saves your life as well. In one way, it's lucky that I met David, Alex, and Miguel and Stephen. But I'm humbled by what we've been able to create and what we have yet to create. And I know that luck definitely plays a big part of it. David? Well, I think you make your own luck, okay? Like you can't really look back and say how it would have been different.

But I feel like we made our own luck by really investing in, connection and relationships. We tried to do right by people we worked with, whether it was the achievement house, you know, the adults with disabilities at first packaged our loose matte and tea bags or like showing up at a store and like connecting with the store buyers or the front ends and like really making someone an incredible matte latte, like the relationships that Chris and Stephen and Don Miguel and Alex and I'll have with each other. Like all of that is very meaningful and profound. Is there luck? Well, sure, we've survived until we thrive. We're still. We're still doing it. We were like on the bleeding edge for most of my career. And now I just say we're

on the right side of history. That's David Carr and Chris Mann, two of the five co-founders of Guayaki Yirba Mate. By the way, that VW bus that David and his brother Stephen drove up and down the West Coast, way back when they first started serving Matei, it actually has a name. It's called Danny. Stephen painted the side of the bus with images of the rainforest and a matteigord above the message honk if you pack them. Hey, thanks so much for listening to the show this week. If you enjoy our show and want to show your support, please help us spread the word. Tell a friend about how I built this or send out a message on social media. If you want to contact the team, our email address is hibt at id.wondry.com. If you want to follow us on Twitter, our account

is at How I Built This and mine is at Guy Raz. And on Instagram, we're at How I Built This and I'm at guy dotraz. This episode was produced by Alex Chung with music composed by Rompeteen Arablewe. He was edited by Casey Herman with research help from Josh Lash and Catherine Seifer. Our production staff also includes

Neva Grant, J.C. Howard, Sam Paulson, Liz Metzger, Carrie Thompson, Elaine Coates, John Isabella, Chris Messini and Carla Estabez. I'm Guy Raz,

and you've been listening to How I Built This.