Noosa Yoghurt: Koel Thomae

[Music] Shoprite is probably one of the hardest, operationally, retailers to work with. Everything that could go wrong was going wrong. We were literally hammering cash for this customer from spoils to the slotting fees. And finally, I was like, this is not working. Like, this retailer could sink the entire operation from a cash flow perspective. So what did you do? We pulled out. You pulled out. We pulled out. And I mean, they pretty much said, you'll never sell it out story again. [Music] Welcome to How I Built This. A show about innovators, entrepreneurs, idealists and the stories behind the movements they built. [Music] I'm Guy Razz and on the show today, how coel-tomé discovered a delicious passion fruit yogurt in an Australian beach town became obsessed with bringing it to the US and built Nusa into a major yogurt brand. [Music] Coel-tomé, like a lot of the founders on this show, was an accidental entrepreneur. She left her native Australia in the late 90s and moved around the Rocky Mountain States doing different, mainly temporary jobs. She waited tables, worked at ski resorts, and in shops. But eventually, she landed a junior role working supply chain for a startup in Boulder, Colorado. That startup was a sparkling beverage brand called Easy. And while working there, she caught the bug. She started to think that maybe she could come up with an idea as well. And the idea actually came to her on a visit back home to Australia in 2005. Coel was visiting her mom and tasted what she thought was the most delicious yogurt of her life. It happened to be a local brand made in a small beach town in Queensland. But for years, she didn't do anything about it. She just dreamed about finding a way to bring that kind of yogurt to America. How she did it, with no experience working in dairy or running her own business? Well, that is today's story. How Coel-tomé and her partners managed to turn NUSA into a multi-million dollar yogurt brand that was eventually acquired by Campbell's as in the soup company. Coel grew up in Australia in the 70s and 80s. She came to the US after college and bounced around Oregon, Montana, and Utah before landing in Colorado. And so in 2000, I landed in Boulder and ultimately got a job working for this IT company. Thinking again, that it would be this sort of Kickstarter to a real career. And realized pretty quickly that I was not very passionate about the IT world. Dying in a cube. But I loved living in Boulder and I really wanted to stay. Boulder was and is an IT hub. But it also was and is a food hub, I think, in part in large part because of Hayne Hain Celestial, which I think is based there and kind of started there, I think. Hayne Celestial, White Wave. White Wave, yeah. Some of these really big brands have started there. And so Boulder became kind of like the Silicon Valley of food. And were you aware of that when you were living there in 2000? I wasn't initially. Food has always been the sort of common thread in my life, from growing up and going to farmers markets. I think being raised by a single mom who just sort of had bigger expectations of me being independent and sort of helping. So I started cooking at a younger age. I'm a weird nerd. I like going grocery shopping. Like I like just cruising grocery aisles. There's nothing nerdy about that. That's what I do in every city I go to. It's so fun, like just the discovery of things. It's the best. And so, yeah, so food was this sort of passion point for me. I realized and here I am in the macar of natural food. And I just decided I was like, I'm going to work in the food industry. You stayed in that sort of job that you hated for at least three and a half four years, right? For this IT company. You were there for quite a while. I was. And once I sort of had this epiphany that food was where I should be, I didn't really have any defined career role within food. I was like, I'll do anything just to get my foot in the door. And because I had been nomadic, my resume looked very spotty. And so it was probably over a year and a half of applying for every job that I thought I was reasonably qualified for. Before I landed my first food job at Izzy Beverage. And Izzy, of course, the sparkling juice brand. Yeah. And that had started in bolder. And so presumably, they're more interesting for you than the IT job that you had before. Yeah. Well, I learned so much, you know, sales, marketing. I was loving it. Absolutely loving it. I guess you're in bolder and around 2005 from what I understand. You go to Australia with your new boyfriend at the time. A guy named Tate. My now husband. So you go to, you take him to Australia to meet your family. So clearly, you're serious about this guy. Yeah. And you go stay with your mom and she's a small beach house in on the Sunshine Coast in Queensland. And tell me about that trip. We were on the Sunshine Coast. We so he'd gone to the beach, we'd gone surfing. And we're walking back. We had stopped in at this little local corner shop. And, you know, back to my love of just perusing stores. I ended up in the back and there was a cooler. And there was this container which was clear. It wasn't really very apparent what it was. But I could tell that it had passion fruit in it. And in Australia, passion fruit is a pretty actually traditional flavor. And for anyone that doesn't know passion fruit when you cut it open, it's this vibrant orange, has black seeds. So it's very distinctive if you know what you're looking at. And so I picked it up, turned it over. There's a label on the top of the lid. Discover its yogurt. So I buy it and we walk back to my mom's apartment. And I immediately try it. And it was one of those just stop you in your tracks taste moments. Like think about eating the best peach in the dead of summer. Or you know, things like that where you're just like, you don't want to think about anything else. And it was like that for me. So I'm like, take, this is, you've got to taste this. This is like literally the best thing I've ever tasted. He tasted, he's like, it's good, but it's just yogurt. And I'm like, hey, look, you don't understand. This is amazing. This is revolutionary. And so I end up calling my mom later that day and I'm telling her about this yogurt that I've just discovered. And Australia's called Queen's on Yogurt. And you know, throughout my whole life, my mom has been somebody to dare me to do things out of my comfort zone. And so she said, you know, you should call them. And I was like, and tell them what that their yogurt's delicious. She's like, well, why not? Like, okay, you know, I turn it over. There's a phone number on the lid. And so I call and I end up connecting with this woman, Kay, Matthewson. And it's the small family business. They've only been around for about 18 months. And, you know, I give her this sort of like mini-pitch, Hey, I'm an Aussie X-pat. I live in Boulder, Colorado. It's an amazing food community. Have you guys ever thought about doing anything with the US? She's like, no, we're way too busy. I was like, okay, well, you know, here's my email address of anything changes with love to hear from you. So I go back to Colorado, you know, having tasted this yogurt literally one time. And I'm back in Colorado. I'm back working at Izzy. And I start just looking for something that tastes remotely like this yogurt. And the yogurt was, it wasn't like Greek yogurt. It was like thick but not as firm as Greek yogurt. Yeah, so it's a whole milk yogurt. I mean, the best way I can describe it is eating velvet. It was just so creamy. And then it's infused with honey. And then that paired with the passion fruit was just this like beautiful, sweet, tart sort of flavor opposition. And yeah, I couldn't find anything like it in Colorado. And Greek yogurt, by this point, 2004, 2005, you start to see Chabani and Faie was around. There were some Greek yogurt that were available. Yeah, they were just coming onto the market. So I could see that there was a trend happening with Greek. But to me, it didn't taste as good as Queensland yogurt. Yeah, and you keep thinking about this, but. Obviously, you just go back to your job at Izzy because it is what it is. But I guess you were telling a lot of people about this yoga, right? Like, it becomes like a weird obsession for you when you go back to Boulder. Yeah, I mean, I sort of embarked on what I like to describe as my yoga, like PhD, right? Like I literally would go to my local Whole Foods. There was a guy working in the dairy section. His name's Joseph. He still works at my local Whole Foods. And he and I would just ruminate about like all the different brands and what did you think tastes the best? And then we started talking about packaging and, you know, we just had like very deep meaningful conversations about yoga. But why you're in Boulder? Like, you know, sometimes you'll meet people who are born in another country. Like I've never noticed somebody from Bulgaria and they'll say, oh, in Bulgaria, the tomatoes and cucumbers are so much better than they are in the US. And you're like, are they really, I think there's pretty good cucumbers and tomatoes in California. But you know, whatever, I get it. You know, I get it. And so you would have been saying to me, oh, the Australian yogurt is the best in the world. And I would have been like, okay, great. And I would have kind of, you know, sort of subtly rolled my eyes. But I would have, you know, I would have listened to you. You were that person. I was that person. I mean, driving my husband crazy, driving everyone at Izzy crazy. So I think when you're an ex-pat, you become very nostalgic about things that you can't eat in your new home. And so I think that was part of it for me. But I just couldn't find anything that tasted that good, in my opinion. Yeah. All right. You go back to Australia in 2007 for another family visit. But this time, you go back with the idea of making an appointment of meeting the owners of the Queensland yogurt company. So you're really thinking, all right, I'm going to take another shot at this and see if there's something there, there. Like you really. I was obsessed. And it was actually my boss at Izzy, who was really the one that encouraged me to reach out to them again. That's cool. I love it when I did told you that. I do too. So I actually have my mom call the second time. She definitely has the gift of the gab. And my mom organized a meeting with the Queensland yogurt family. And you met the, these are the owners, the Matthewsons. Yeah. So it ends up being, okay, the two sons and one of their wives. We meet in my mom's beach apartment and, you know, I go back to. I live in Boulder. It's this amazing food community. And I said, I really believe that the American palette is not that different from a Nazi palette. And there's just nothing like it. I said, you know, yogurt is growing. As a category, I can attest to that from just having watched it over the past two years. And I think there's this amazing opportunity. And again, my vision wasn't to create this national brand. I just thought I could have this really cool Colorado based company. And then I selfishly get to eat it more than once a year. And the idea was, maybe could I license it from you? Like, did you even ask at that lunch? Yeah. Would you consider licensing the recipe to me? And when you do a Nazi lunch, you definitely have some beers. And they essentially said, look, yeah, we think there is an opportunity in the US. So we'd happily license to you. We'd want to invest in the business. And we'd be happy to bring like a yogurt maker over and just help with the initial start-up of the business. This is from a three-hour lunch. And a hand shake. And but no numbers were discussed at that time. No. No. And just that curiosity, I mean, as somebody who makes yogurt myself in my Instant Pot, it's not, you know, commercial quality yogurt. But is it that like, did you need to license the recipe? Was it that complex? Was there a world where you could just have figured it out? Maybe. But that was not what I was thinking. I just felt like this was so unique and why try and reinvent the wheel. Fair enough. And you're, this is now 2007. Yeah. You go back to Boulder. Let's just pause for a second and talk about where you were at this point in your life. Because Izzy had sold to Pepsi. And you got some equity when you joined. So you got a nice-sized check when Pepsi bought out Izzy, I would assume. I did. And more money than I ever envisioned having in my life. Do you mind telling us, telling us how much you got from that equity? I got about $75,000. Wow. That's pretty good. Because you were like in your early 30s at that point. Yeah. I mean, and just a junior position had just bought my first house. Yeah. It was sort of revolutionary to have this kind of money. All right. So you get back to Boulder. You've got probably after you bought the house and the down payment. Maybe you got, I don't know, maybe between 25 and 50 grand that you'd be willing to put in. What was your next step? I mean, now you knew that they were willing to commit to this. But I'm assuming, I mean, what did you know about the yogurt business? What did you know about how to start it or anything? Did you know anything? I knew nothing about dairy. I just knew I loved to eat it. But yogurt, as I realized, very different industry from the US to Australia, like way more regulated in the US. You know, the Mathiesons were pretty adamant that we would only be able to make this yogurt if we built our own manufacturing facility. And so I'm like, okay, I can figure this out, you know, thinking more small scale, commissary kitchen. Right. And ultimately realize I have to go talk to the state health inspector. Right. Because that's right. Because you don't want to kill people. You know, I kill people with the bacteria or something, right? So you go to the state health department to get more information. What did you find out? I found out that I was even more ill equipped than I imagined. And you know, this state health inspector kind of like figures me out pretty quickly that I am completely green when it comes to dairy. And he asked me, do you even know what the PMO is? And I say, I have no idea what you're talking about. So the PMO is the pasteurized milk ordinance. And it is this volumous document that governs dairy essentially. And he handed me a copy and sent me packing and said, don't come and talk to me again until you understand this document. Fair enough. I walk out of the building and literally like shed a tear. What was the problem with the document? Was it just impenetrable? I mean, I felt like it would take me an entire year to read it and really understand it. So you felt like you just did not have the skill set to do it. And so at that point, what do you do? I mean, I mean, this is the point where a lot of early stage founders just kind of say, you know what? It's hard. This isn't for me. I'm going to move on. I decided to pivot. I was like, OK, I can't do this by myself. I need a dairy expert. And so I sort of reached out to my network. And I said, do you have dairy consultants? Do you have anybody that's in dairy? And who was your network, by the way? My Izzy people. Yeah. It's a small network. Yeah. Just asking if they knew people in Boulder who are connected. You just started asking people you knew. Do you know anybody in dairy? Yeah, exactly. And it's an old world process. And what I'm thinking is very entrepreneurial. When you say old world, it's like small families, generational families-- Exactly. --in this business. Because a lot of derries are small, but then they sell to larger brands that just, you know, write. A lot of these, as far as I know, in this area, they're families that have been in a business for two, three, four generations. And that's what you're running into? Exactly. But I don't see them as somebody that I can necessarily partner with. Until one day I'm at my local coffee shop, and I see a flyer for this fourth-generation dairy farm in Northern Colorado, called Morning Fresh. A flyer advertising what? It just sort of gives a little blurb about their family story, how they're treating their cows, how they're growing their own feed. I do a little bit of research and realize that they're selling their bottled milk already at Whole Foods. Oh, so it was a flyer advertising the dairy because they were branding their milk morning fresh milk at Whole Foods in Colorado. Yeah. And so I ultimately call call, getting really good at call calling at this point. And I connect with Rob Graves, farmer Rob, as we like to call him. And he was, who was Rob? Who was Rob? Who's the owner? Rob is the owner of Morning Fresh, fourth-generation dairy farmer. You know, I sort of give him a little mini-pitch on the phone. And your pitch was what? That I've discovered this amazing yogurt. I have a license to make it and I'm looking for almost like a co-man, a co-manufacturing facility that can help me produce it. And he's intrigued, he invites me up to the farm. How far away from Boulder was it? It's about an hour north. Yeah. You know, he was generous to even have the meeting. I think he thinks I'm pretty crazy at this point because I don't have any product, right? Because tasting is believing. Right. You're just saying, "I have this amazing yogurt, but he's like, where is it?" Yeah. You're like, "It's in Australia." Exactly. So then I call my mom, "I ask her to ship me some samples. I don't even remember how we got them through customs because you can't technically ship dairy internationally." She just like ships him in like with dry eyes or something? I think she froze like milk jugs. Oh. I mean, imagine this yogurt gets to me and it's probably not food safe at this point. Yeah. But I go back up to the dairy to morning fresh, meet with Rob again and I get him to taste the product. And at this point, he has the same taste moment that I did back in Australia. He finds it to be as amazing as you do. He does. Right, because he could have been like, "You know, it's pretty good, but it's not amazing." No. So he's immediately intrigued, agrees that this is a huge opportunity. He's like, "You know, good timing. I'm in the process of designing and developing a new bottling plant for my fluid milk." He's like, "We can probably add a little extra space to make yogurt." So they were not making yogurt. They were just bottling milk and maybe cream. Yeah. Because that's a whole different process. Yeah. That's a whole other line that he's got to put in. Exactly. But he's like, "Yeah, we can do it." So then as we, you know, the conversation sort of continue, we realize it probably makes more sense for him to come on as a partner. As a partner. Fair enough. Yeah. All right, let's kind of break this down because this is really important and it's always one of the most complicated, awkward, frustrating, and just generally unpleasant parts of starting a business, which is talking about the details of what to do, how to divide it up, especially when it has no value. Like this is worth $0.00 and 0.00 cents. And you know that the partners in Australia are willing to put some money in and put an exchange for ownership. Yeah. You want to own a significant amount because it's your idea. Rob is going to have the equipment he's going to make it. You probably, first of all, in terms of overall startup cost, did you were you able to figure out how much you would need by this point? We would lease the space from Rob, right? So that's cash, but it's not like huge upfront costs. The Australian family was willing to do a pretty minor lease on the product. Basically, it was a dollar license agreement because they wanted to be investors. And we're thinking about, okay, who are the retailers in Colorado? What's the opportunity set here? How much do we need to make to service this market? And sort of backed into this number of $400,000. That would cover the costs of getting out the ground. Exactly. How did you have, you didn't have that money? I had some of that money. Had a chat with my mom and my stepdad. So they were on board. They had tasted the product. They were believers. And then the Matthewsons and Rob. So we were the three sort of blocks of investment. So you put all your money together to start this thing. And then in terms of figuring out ownership and equity, just make it simple and just divide it a third to third to third. It was a half a quarter quarter. It's because the Matthewsons family put in a larger share of money. Got it. Okay. So you and Rob each got a quarter. They got half. And you would try and make a go of it with the $400,000. Yeah. And I mean, here you are. You are approaching maybe in your mid 30s. Are you in any way nervous about putting all that money into this business, all your life's like all the money you saved up so far? No, I mean, I think no, you were not nervous. There was nothing nerve wracking about that. Not really. I think I was so excited by this opportunity. And I grew up where I didn't have a lot of money as a kid. But my mom always prioritized experiences over things. I've always been a hard worker. So I just felt like if it all went up in flames, I could always get a job again. And I have to assume that and you're still working at Izzy, right? At this point, I had actually left Izzy. I had gone to work with one of my Izzy alums who had started another company called Snickety. So you became a cut. It's as interesting as how I built this always comes together in these moments. Like, I know that Izzy at check from Izzy also helped a finance a start of Soulcycle. We did that episode years ago and I know one of the founders of Soulcycle was in an early investor in Izzy and they got a $200 dollar check and that helped to find that Soulcycle. And then Snickety, I think that it was founded by the wife of Brett Schulman who would go on to help create and scale Kava, which we've done on the show. Because Snickety never really took off. It didn't work out. But this was a kid's snack company that you were. Yeah, it essentially sustained my family while I was getting new stuff the ground. And we were in sort of this little co-working office with a few other consultants. So they sort of became my in-house advisory board. All right. So it's going to be you, Rob and Matthew Sins. And that company was called like Queensland yogurt company, but that was not what you were going to call it in the US. No. I really felt like that had no connection to Colorado, to the US. No one would have any understanding of what Queensland is. But I wanted it to have a link back to its Aussie heritage. And the family, the recipe, it all comes from the Sunshine Coast. And I was like, well, what are some of the beaches on the Sunshine Coast? And Nusa, I was like, okay, it's easy to say. It's not very long. It ties into the storytelling. This is the name. So it took a little bit of convincing, but finally everyone agrees. It's Nusa. All right. So you call it Nusa yogurt and I-- You're going to get with an H too. With an H. Yogurt with an H. Yes. Right. Okay, because that H is really important in the word yogurt. Without it, you would not know how to pronounce that word. I mean, part of me would have been like, well, we have to pay the type center a little extra money for that H. Like, could we save a few pennies by removing the H? But no, I get it. You wanted the H in there. Okay. But just again, linking it back to its Aussie heritage. When we come back in just a moment, how co-ell brings her first tubs of Nusa to a major retailer and how she responds when they say, we hate this packaging. Stay with us. I'm Guy Raaz and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raaz. So it's 2009 and to launch her new yogurt brand, co-ell has built a partnership that's 8,000 miles long. In Australia, the Mathies and Family is handling the recipe and in Colorado, Rob Graves, the dairy farmer, he's getting ready to make it. So Rob's building his new bottling plant and as things go with construction, it's delayed. Yeah, so we initially thought we were going to launch in 2009. The building's taking longer to get finished. I'm with the direction of the Australian family trying to find equipment at auctions and ultimately, you know, it really is, we're going to push to a 2010 launch. Things were just too delayed. I think another thing to note too is just people thought we were crazy because this is coming off the heels of the global financial crisis. So I think there was sort of like, what? You're going to invest all this money. You're going to start a new business when the world is sort of employing. And I didn't even really consider that. I just was like, I still think even in hard times, people are going to invest in delicious food. Yeah. I want to just go back to the process for a moment because you had the mathisense come and show you guys how to make this yogurt. Right? Yeah. And I'm assuming there's probably, I know we'll get to this because you're not with the company anymore. So there's probably some proprietary things that maybe can't be discussed. But can you sort of generally describe what made it so complex? Because again, what did it require? It was required to make this yogurt into this creamy yogurt that you loved so much. You know, I don't know that it ultimately was that complex. But I think part of what made it unique initially was that it was being made in 10 gallon buckets, which is crazy. Like, I mean, I remember doing runs to the home depot because we were running out of buckets. So you essentially are cooling the yogurt faster because it's in a smaller volume vessel. So that changes sort of the way the cultures are interacting with with the product. I think the fact that we were infusing it with honey, I mean, there was certainly sugar added as well, but infusing it with honey gave it a different flavor profile. And what made that unique, made it harder to scale as we grew? - And also, were you like, was it, is fermenting the right term? I don't know, was it, was it, - Culturing. - Culturing, like for how long? Like eight hours, 12 hours, 15 hours was that an issue too? - Certainly, right. I mean, again, taking it from this small vessel to a larger vessel, to a larger vessel, and trying to have consistency in the flavor profile was really unique. And I, it's sort of a testament to Rob, 'cause it was sort of his engineering brain that really figured out how to develop that. - Yeah. - I mean, we were making it in tang Island buckets for over a year, which gave the state health inspector a lot of heartache. You know, he gave us a pretty long runway, but out of the gates, he said, you can't do this long term. - You couldn't do a long term because there was a risk of contamination? - Yeah, I mean, there was too many touch points, was his opinion, yeah. - You wanted to do in like a few 100 gallon buckets. - Yeah, sealed. - Okay, so once, once you guys get manufacturing going, you obviously have to start getting the yogurt into stores, and you said earlier that Rob, like was already selling milk to a few whole foods in Colorado, so at least he had an in, right, with Colorado Whole Foods, which is not the entire country, but still, it's still something. And I guess you guys were able to get a meeting with a buyer to see if they would be willing to sell your yogurt. - Yeah, so by this point, we've invested in the equipment, we've invested in the packaging, and with the packaging, we really wanted it to be reflective of that first experience I had in Australia, which was transparency, letting the product sort of speak for itself. And in that initial sort of startup capital, we didn't really factor in a custom mold. We just sort of assumed that we'd be able to find a traditional dairy cup that was transparent. - Off the shelf. - Off the shelf. - Just a clear container. - Exactly. - Okay. - And it actually didn't exist. So, you know, at that point, most yogurt was sort of between 5.3 to six ounces. And there was nothing. There was nothing available in stock packaging in those sizes. I was pretty adamant that we needed to be in transparent packaging. And so that ultimately led us into this eight ounce container. It looked more like a hummus tub. But, you know, with some refinement, I felt like it could stand out. It could be unique. But it was a little nerve-wracking 'cause we knew that just by volume, it would drive us to a higher price point on shelf. And so this is what we've got as we go to our first meeting with Whole Foods. - With Whole Foods. You show them this packaging, okay? - Yeah. They just see the packaging and I'm like, we hate your packaging. And I'm like, okay, I understand. I was like, but let's taste the food. Like, let's taste the yogurt. So we do a taste testing. They're raving about the product. But then they immediately go back. And they're like, but we hate your packaging. - We hate the packaging. - Yeah. It's eight ounces. It's gonna take up all this space on the shelf. Like, you know, they're thinking all of these unit metrics. And I'm like, look, all I could do was be honest. I said, we have already invested all of us out of capital in this equipment, in this packaging. We can't pivot at this point. We've just gotta go. So I just wore them down. I'm like, let's ignore the packaging. Let's think about the food. If you give us this opportunity, I will be in every one of your Colorado stores demoing the hell out of it. And we're gonna make it successful. - All right. That which is great that you do that because Whole Foods, you know what they're doing. And here you are a new entrepreneur. And so the fact that you stuck to it, I guess you didn't have a choice. You're gonna have to. But I wonder, I mean, before, even before they agreed and you went into Whole Foods, right? How are you gonna differentiate it just in that millisecond or one second that somebody was just passed by this brand on in the refrigerated yogurt aisle? - The only thing that we had on the packaging besides the name, Nusa, we had a little tagline that said, Aussie culture, which obviously has a double meaning Colorado fresh. That was the only thing that implied that there was sort of a link to Australia. Again, I think because it was in transparent packaging, you could see the freshness of the product, the fruit puree with the white yogurt really popped. And nobody on the shelf at that point in time was doing transparent packaging. So I just had this strong belief that if I had discovered it, purely because I could see the product when I first tasted it in Australia, somebody else was gonna take that leap of faith. - All right, so finally, finally, you get this first run into Whole Foods, I think in January of 2020, and it's just in Colorado. - Just all over Colorado? - Yeah, only the Colorado stores, 'cause the Rocky Mountain region at that point, I'm brilliant, I think, Idaho, Utah, but the bulk of the stores were in Colorado. - And how much yogurt at this point? - I read it at this point, you could only make about 200 gallons of yogurt a week, which was probably plenty at that point. - Yeah, so we were making one, maybe two batches of yogurt a week to start. - And what were your first flavors that you were gonna put on the shelves at Whole Foods? - So we had four flavors, we had honey, we had raspberry, blueberry, and mango. - So you did not do the passion fruit? - We did not do the passion fruit. - To tricky in Colorado to get, I mean, probably expensive to get. - Yeah, at that point, just even trying to figure out how to source that puree was more than we wanted to address. And I think knowing that your consumers are still pretty traditional, we wanted to sort of stay in that bandwidth of having flavors that we knew would sell. And mango was sort of maybe the most exotic in that lineup. - All right, so you came to the Whole Foods and then you spend every opportunity you have to go to each of these Whole Foods in Colorado. And roughly how many were there in Colorado in 2010? It couldn't have been more than seven or eight. - Yeah, I think Max maybe 10 stores. So I would just sort of, we hired a few other demo people but just sort of rotating through those stores, really sort of connecting with the store managers. 'Cause I really, I think from my time as being a server, right, like really understanding relationships and how they can serve you. When you're getting out of the gates, I really wanted to build those relationships with not just the store manager, but the people stocking the yogurt. So in a sense, I would not only sample consumers, but I would go and sample all the store employees as well. - So you would make sure that the employees at the store tried it too? - Yeah, absolutely. - And did that work, I mean, in store sampling? - It did, it absolutely did. And obviously as we grew, I couldn't be in all of these places, but when you actually meet the founder of a business, there is sort of a more openness and emotional connection to trying something and believing in it. So I actually had a lot of friends and family do sampling events for me as well. I just, I tried to think of as many avenues where I could get people to taste this product. - And also doing farmer's markets? - Yeah, so that started spring of 2010. That was sort of actually a harder sell than Whole Foods with getting into the Boulder Farmers Market. It's considered one of the top 10 farmers markets in the country, so essentially if you come to Colorado in the summer, you'll probably end up at the Boulder Farmers Market. - And when you were doing this the farmer's market, again, like probably weren't that many people selling yogurt at the farmer's market. - We were the only yogurt vendor. I still have to laugh thinking about how crazy it got. And that just sort of built a groundswell. And people obviously were then like, well, where can I get it? If I can't make it to the farmers market on the weekend. And at that point, we still were really only available at Whole Foods and a few independent markets. - Did that have, I mean, did that get you? I mean, were there people coming up and saying, hey, who are you guys? Like, can we talk? I mean, did you start to hear any of that? - Yeah, so we actually had a lot of inbound emails from out of state. And one of those inbound emails was actually from a retailer called Hivee, which is in the Midwest in Iowa. And essentially, I don't know if I sampled him or if somebody else did, but the president of Hivee had been at the farmers market and tried Nusa and loved it. And basically told his dairy buyer to contact us that they wanted to carry it. So we said yes. And I think the learning from that was that, yes, is with the right partners, we're good opportunities. But we learned that not every opportunity was the right one. - And you did not presumably have the logistical capacity to really go that far, are beyond Colorado, maybe into the Midwest. - Yeah, I mean, at that point, we were producing the product with about 28 days of shelf life, which is short. I know there's other products out there with even shorter shelf life, but you add in shipping and logistics of getting it onto the shelf. - And you got like 15 days. - Yeah. - And how did they do at Whole Foods in Colorado? - Like, it was hard to keep up with the growth in Whole Foods. - Well. - And they quickly expanded us into their Rocky Mountain stores. - Yeah, I think, and in your first four year of business, you've really launched in January of 2010, or are you profitable? - I mean, getting there. - Getting there, so pretty great first year. - Yeah, I mean, not accounting for the fact that we weren't paying ourselves. - Yeah, right. I guess you got an opportunity to work with a pretty big retailer in New York in 2011. First of all, who was the retailer? - The retailer was ShopRide. - Oh, that's a big one. - It's a big one. - And they wanted to carry your products. Now, that's New York, that's not Iowa, that's far. - That's far. - That's not Colorado, but it was a big opportunity to go in there, and how many stores were you, they want you in? - They were, I think, about 250 stores. - Wow. - Yeah. - And you guys said yes. - We said yes. - So in 2011, we brought on a business development manager. He was an outside contractor, and, you know, a very good salesperson, let's just say. And at this point, we still have not ever sat down and created any type of strategy for the business. We're just pinch hitting, like, if an opportunity comes up, we're gonna say yes. And so we get this meeting with ShopRide. We know that we have to invest with these retailers as far as, you know, potentially slotting fees and all of their install marketing programs. But we started asking and tried to get creative where we would say, look, we're willing to invest whatever that slotting fee is to get on the shelf. But can we put it into demos? Can we put it into your retail marketing programs where we have a real opportunity to get off the shelf? 'Cause we're proving out in Colorado that if we can get people to taste this product, it's gonna sell. And interestingly, ShopRide said, okay, well, we're willing to defer your slotting fees. We're gonna give you a 12-month time horizon. - So you would have to pay them the fee to-- - Pay it upfront, yeah. - 'Cause again, I know we've said this in the show before. Cross-restort, if it works, is an amazing business because they get the markup and they make money from that. And then they make money 'cause the brands have to pay them to put your essentially renting space on their shelf. So they have all of these multiple revenue streams. - Yeah. So it was really learning on the job for me. But yeah, so ShopRide says we're going to, instead of charging you $100,000 out of the gates, we'll bill it quarterly. And I'm like, okay, well, this sounds like, something that we can cash flow. So we launch, so we're already $100,000 in the hole out of the gates. - And you got a shippered truck it out there? - We're trucking it out L-T-L, which, you know, doesn't move as fast as a full truck, is more expensive than a full truck. - These are refrigerated trucks, obviously. - Yeah, come to learn that ShopRide is probably one of the hardest, operationally retailers to work with. Like if you miss, if you miss their delivery window by like five minutes, they'll refuse you and then you have to reschedule. - Wow. Getting it, I mean, you're making this in Colorado. It's got a 28-day shelf life, the product. - Yes, and to your point, yeah, so we've got 28 days of shelf life, we just get rejected at the dock. Takes another two days to get rescheduled. I mean, it was, it was a nightmare. - Yeah. - There was sort of a disconnect between what was coming from corporate down to the individual stores. So we were seeing not all the stores were getting set. So everything that could go wrong was going wrong. And I mean, we were literally hammering cash for this customer from spoils to the slotting fees to not getting much velocity because it wasn't getting set in all the stores. Like, this retailer could sink the entire operation. - So what did you do? - We pulled out. - You pulled out. - We pulled out. - Which, you just ate it. You just knew you're gonna, how long before you, how long did you, before you made that decision a year, six months? - It was probably about six, six months that we realized that we couldn't continue to do it. - You were just, and you basically lost at least a hundred grand off that deal. - And some, and some. It was such a hard, even though I knew we were losing so much cash, it was a really hard decision to make because I knew that if we pulled out, that might be the last opportunity to ever sell it that retailer. - Right. And we've had these examples on the show where, it's a struggle, it's a struggle, it's a struggle, and then eventually, after just bleeding for years, like it works out. And that could have happened here, but what you're saying is, you didn't do all of the kind of planning and projections in maybe in the way you should have done 'cause that would have, you would have realized that this was not gonna be sustainable. - Absolutely. I mean, we didn't do any of that. We just were kind of operating in the wild west. - Yeah, you know, it's interesting. We did an episode on the brand called Zoomies, which sells skatewear and snowboard gear. And Tom Campion, who was on the show, and I remember him saying something, which was, would make a retail brand successful, is basically relentless focus on inventory control. - Yeah. - And the point of that was like, it's this little boring things, 'cause I think accounting is so boring. It's the most boring part of a business, but it's so critical. It's sometimes, that is not sometimes often. It's that, which can make a break of business. - Absolutely, I 100% agree. And we weren't focused on that. In the first, I'd say two years, until we had that big misstep. - Yeah. So I guess you were on the East Coast in New York, it's an influential area. Like, it must have also shattered the idea that, oh, the American palette. It's just like, yeah, like, it must have, part of you, I would assume, must have thought, maybe I was wrong, maybe this is just working, gonna work in some parts of America. - Yeah. I still have this strong belief that New York could be a great market for us. And it's, you know, shop-ride is an amazing retailer. Like, they do a ton of velocity and a ton of volume. But for where we were at the time, it was too much. And I mean, they pretty much said, you'll never sell it our store again. And I was like, okay, but I'm not gonna be a business if I don't do this. - When we come back in just a moment, the delicate partnership between Coel, Rob, the dairy man and the Matthewsons starts to break down. Stay with us. (gentle music) Hey, welcome back to How I Built This. I'm Guy Raaz. So it's 2012 and after an abrupt exodus from shop-right in New York, Coel has managed to steady the business and is even thinking about expanding again. So she takes Nusa to Expo West, the big natural food show in California. All right, so you guys have a booth there. Got a lot of buyers and, you know, vendors, all kinds of people are walking around and trying different things. And one of the, I guess a group of people who came by were from Target. - Yes. - Did you know they were from Target or were they hiding their badges or? - I didn't know they were from Target, no. - Right. - Yeah, no. They were hiding their badges. A lot of those buyers are pretty good at being stealth. Yeah, it wasn't too, you know, post-expo that we actually got an email from Target. I think Target maybe had been a little bit behind the curve with Greek and wanted to be ahead of what they saw as sort of the next evolution in yogurt. And they thought Nusa could be that. So they essentially offered us a test in, I think it was about 250 of their super target formats. - Wow. And did you have the capacity to fulfill that? I mean, at this point, how much yogurt were you making a week? We're now probably operating at least four to five batches a week. So we're starting to butt up against what I would consider some capacity constraints, right? 'Cause you're now having to bring on probably two shifts of people to work a seven day schedule. And at this point, I'm happy to say we're out of the 10 gallon buckets. And so it was just, it was sort of this constant leap frog. We've got at this point, we have a line of credit from a traditional bank who's allowing us to buy more expensive equipment and we're just. constantly investing in the manufacturing process. By the way, at a curiosity, what is the maximum shelf life you can get for cold, pasteurized yogurt? You know, I'm not sure about some of the competitors, but we were at 45 days. Okay, so a huge improvement over 28. Yes. But still, it just shows you like the minute that leaves the warehouse to clock is ticking. Otherwise, you have to throw it away. Absolutely. I mean, it's just an argument for going into dried beans. Oh, 100% guy. I will never start a perishable food company again. Yeah. Alright, so you guys have some automation and you finance this mainly through loans. So once you're going into a target, you're also going to go from like, you could go from like two million in sales to like 10 million in sales, 15 million in sales within months a year. Yeah. I mean, just because of the scale of a target. Well, I mean, so we launched, there was probably like mid year that we launched in super target. They came back four months later and expanded us into a thousand stores, a thousand more stores, a thousand stores. And were you at breaking point, like at that point as a business? Yes, we were at breaking point. And basically I had to stop selling at that point. You were to stop signing contracts with retailers. Yeah. I mean, a good problem to have, but like how it wants you sort of in the groove of selling. Yeah. You know, because again, like in the back of my head, I have sort of like, okay, well, if I say no, now, will that opportunity exist in 12 months? Yeah. And are you putting all your eggs in the target basket, which could or could not work? Yes. Thankfully, it worked. Tell me a little bit about the business by this point, end of 2012. You're in the thousand targets. But from what I've read, you guys are really running lean. I mean, we were profitable at the end of 2012. We were close to a $20 million business. So we were able to pay people reasonable market, like competitive salaries, but it was still such a small team. Right. To attract a good COO, you would have had to have paid at least 150 grand. And then we were able to offer some options. They ended up being the only person that we offered options to, which actually became a bit of a point of contention between the partners as we started growing even further. Yeah, imagine. And we never had a board of directors. We never had an internal advisory board. So it just became sort of budding heads as far as how do we continue to grow this business and put appropriate team members around it. Yeah, I mean, who was in charge? It was you. There was Rob at the dairy. And then the brothers, the Mathies and Family in Australia, who actually was the decision-maker was that ever kind of discussed who would ultimately make the decisions? No. No. So everybody had a veto in a sense. Exactly. Which is not great. It's definitely a recipe for not great, especially when you're on a rocket ship of growth. Why didn't you guys have that discussion? I'm not, I'm not brow-beating you because I've made the same mistakes. I'm just curious why you didn't. Was it just an oversight? Was it like you never thought that this would be required? Yeah, from me personally, you know, it was my first time ever being in business. You know, I could see that other companies were doing it, but I had a naive sense and trust in my business partners that we could just all get along and be aligned because things were pretty rosy in the beginning, but with growth and harder decision-making, it just became readily apparent that we were all not super aligned in how we wanted to go forward. What were the disputes over? Oh my gosh. I mean, ranging from should we pay ourselves, you know, I was sort of the poor business partner, or I had to have that second job where the other two partners had businesses that they could rely on to pay themselves, to, yeah, how to grow the business. You know, even with that mistake at Choprite, there was still sort of this pressure to say yes to every opportunity where I was sort of pushing back and saying we actually have to have more strategy if we want to keep cash flowing this rather than taking outside investment. And then sort of coming into 2013, 2014, and I could just sort of see that we were going to hit this wall. Around, around. If we couldn't, if we couldn't agree how to hire a real team of people to help us run the business because when things start to really take off, sometimes founders need to get out of their own way. Yeah. Just reading between the lines here and again, they're not here to kind of refute this, so I'll do my best to, you know, we always try to be very fair to everybody because it's a great product that you were selling, but it sounds like the clashes really were with you and the Australian partners. And Rob, I mean, and Rob. And Rob, you all just had very different viewpoints on how to go forward with growth. They were more, you felt like they were more conservative. More conservative really didn't want to give up equity, and I understand that too. Like I understand that perspective, but I think I knew that that's what it would take to really recruit. I rock it. Yeah, to recruit the right people. And we essentially hired a salesperson without sort of that equity ask and literally had to fire them two months later, right? Like we just couldn't get the right people. When they have no skin on the game, they're just, you know, I mean, you're just, it's a crap shoot, it's just, they could be great. Yeah. But if they have skin on the game, they're incentivized to really do well. Yeah. And then I had had my daughter in 2013. So I was starting to like max out on just my capacity. Well, that's a lot. That's a lot. And then interestingly, we had sort of created or revolutionized whole milk yogurt. And we started getting big players coming in and directly competing with us. So within, I would say sort of that 2012 to 2014 timeframe, there was probably six knockoffs that came into the market from Dan and from Hain Celestial to even Kroger doing a private label version of NUSA. All right. So I imagine you're starting to think we got to do something about this or this might all go down the tubes. Yeah. So it was beginning of 2014, the Australians were starting to talk about wanting to take some chips off the table. And Rob probably could have just gone in perpetuity because he's a generation Jerry Fama, right? Like I feel like Jerry Fama is people of that world just work hard and just keep going, no matter what. And so it just became this sort of dialogue of like how do we solve all of these problems? So I think by 2014, you guys are doing like 40, 45 million dollars in revenue and growing. You are feeling like the four of you guys were not necessarily the right team to turn this into a hundred million dollar business. Maybe not the right team is not the right way to sort of view it, but it really was a bigger team, somebody that was positioned to take it into that hundred plus million realm because it does become a very different business, right? Like you are an important brand to retailers. There's just different expectations from your business partners. I mean, I feel bad for a lot of our employees that were with us from the early days in the sense that they never really got a lot of oversight. You know, we weren't building like actual career paths for these people. So even though we were a cultured product, I didn't feel like we had a great internal culture in the sense of, you know, creating real business opportunities or, you know, growth opportunities for our employees. And then we finally sort of got alignment around, okay, we don't think we want to sell to a strategic at this point. You don't want to be acquired. You don't want to be acquired because, you know, Rob still really wants to be part of the business. I'm sort of on the fence. I could have probably gone either way. And then, you know, these dream family just really wanted to sort of realize their investment. So we ended up hiring an investment banker and sort of running a process to find more of that private equity type investment that would support the growth and help us build out that team. So 2014, you do get a strategic investment from a group called Advent, right? But until they actually acquired or put in the investment, you guys were trying, they were probably in your data room looking at your business. Meantime, you're running out of product. Like, there's a lot, and that deal could fall through. Absolutely. Which was never acting, right? Like, I knew this was sort of like, if we lose this deal, we're pretty screwed. It was probably the most stress I've ever endured in my life. But thankfully that sort of somewhat ended when they made the investment. And they buy a majority stake in NUSA. I think they're based in Boston. They're Boston based, yeah. Private equity firm. by a majority position in Nusa, but you. guys stay on. I mean, at least you and Rob stay on as employees. We do. And actually, we rolled over a pretty significant minority ownership in the business that was sort of how the deal was structured. You were incentivized to make it work. Incentivized, that's the right word. Yeah. But you know, it makes a lot of sense, right? Like, we're in the middle of this growth growth. And to your point, we do bring a lot of value to the business at that point. And if we feel like we need to sort of start to hand over the reins. And was it fairly quickly after they, because I think November 2014, they made that investment, was it like by early 2015, the whole new executive team was brought in? Yes. And these are people with deep experience in food. Yes. And it was a game changer. It really was a game changer. You actually liked it. I love God. These people know nothing about this business. I hate working with them. They don't believe in the quality or the spirit. No, you'd have your low. No. So I sort of see these two very distinct chapters that I was involved with at NUSA. It was sort of like the Wild West chapter. And then our professional chapter, which we I think we created an amazing internal culture. And I had an absolute last in sort of that second chapter because I didn't have the tension with my business partners anymore. And so you were committed to staying with them, I think, for about four years. I mean, we were committed until they decided to sell the business. And they did eventually sell it, I think, in 2018. It was a merger, aqua merger kind of thing with a company called Sovos brands. And they owned or owned a bunch of brands like Rouse, I think Pasta Sauce is one of the brands they owned. Maybe they still do own it. They did until Campbell's. Campbell's bought it right. Campbell's bought them out. Yeah. Yeah, beginning of this year. And so you were your remaining shares were bought out at that point. And I have to imagine you actually may have made more money as a minority owner than when your majority stake was bought out. Yeah. I mean, you had two bites at the apple, as they say. Two bites at the apple. Yeah. I mean, this business that was started really in 2010, it was kind of like an eight and a half year journey, which from one perspective, doesn't seem that long, but I'm sure from your perspective, it was a long journey. It was a long journey because they start up years too, right? Yeah. So it was over a decade of my life that I literally all I thought about was yogurt, which is a really long time to think about one thing. And I feel like I worked a lifetime in that decade. When you were done, which are sort of when you stepped out of the business after the acquisition in 2018, you were well positioned financially, probably easily for the rest of your life. What did you, yeah, what did you want to do? All the things you weren't able to do while you were building the business? Yeah. I didn't eat yogurt for an entire year. Really? Nothing. No, I didn't even want to, I didn't want to shop the yogurt aisle. I just didn't want to think about yogurt for a while. I decided I would say yes to any sort of travel opportunity. Yeah. And I just needed to be like a little chill for a while and hang out with my kid and hang out with my family more. Like probably one of the most important things I'll do in my life is raise a good human. And I finally have a little more time to focus on that. Yeah. And so there was no plan. There is no plan for you to start another business. Like you've done that and you have no ambition or desire to go through that again. Yeah, it would be hard. I think it would take something incredibly special to want to go back into the trenches again. You can make more yogurt if you want. I could even, I could even explore buying newse back if I wanted to. Right. I think it's for sale. I think that Campbell's is looking for a buyer. It is. I don't think I'm going back into yogurt. Though I am very interested in sort of the dairy free space. I know that sort of seems counterintuitive. No, no, it's interesting. I sort of feel like I'm back at university, that university phase, right? Where I'm like, what the hell do I want to do with my life? And so I'm just exploring a lot of different things. When you think about the journey you took, you know, and I mean, starting this business in Boulder, thinking it was going to be like a local business and getting the family in Australia to work with you and meeting Rob and the dairy and all that that happened and then making a lot of money off of this thing, which probably I'm sure wasn't in your plan, but of course, was a very pleasant ending, I'm sure. How much of what happened to you attribute to luck and how much do you think had to do with the work you put in? I think there's a huge element of luck, right? I think about 2008 and sort of seeing this emerging trend of Greek yogurt. And in some ways, I actually think we thought we had missed the boat. Ultimately, we timed it just perfectly because it just reinvigorated the category, Greek yogurt, and we got to ride that wave with the big players. But coupled with that is, you know, as much as I may have disagreed with my business partners over different things, the one thing I think we can attest to is that we all worked really bloody hard. You know, I've mentored some startup companies where they sort of say, "Well, we want to be where you are." And I'm like, "Okay, well, I don't know if I can actually help you because you have to be willing to work really hard and your eye cannot be on this big outcome, right?" And that was never what it was about. For me, in the beginning, or for Rob, it was, you know, a passion around this product that kind of took on a life of its own. It's coel tome, co-founder of Nusa Yogurt. By the way, the company did eventually get around to launching a passion fruit yogurt, the flavor that inspired the whole thing. But today, out of the 18 different Nusa flavors, including cinnamon roll and pomegranate and tart cherry, passion fruit has sadly been dropped from the rotation. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter at gyros.com or on Substack. This episode was produced by Devin Schwartz with music composed by Rammstein Arablewe. He was edited by Niva Grant with research from Olivia Rockman. Our engineers, Robert Rodriguez and Gilly Moon. Our production staff also includes Alex Chung, J.C. Howard, Carla Estevez, Sam Paulson, Chris Messini, Kerry Thompson, John Isabella, and Elaine Coates. I'm Guy Raaz and you've been listening to How I Built This.