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Friends & Founders of Tally Foods Kyle Watts and Jon Gabayzadeh discuss business and entrepreneurship. www.drinktally.com
Episode 2
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[00:00:00] Now they're gonna live here. We have no heat, right? We need heat, . So we started heating the building for the first winter. It cost us like 50,000, 60,000 heated. And then after that winter, we never heated again. We basically lived in the cold. Yeah, John was just saying how we, uh, got a really positive feedback from, uh, an initial potential national account.
So we submitted our information to them and they just got back to. Overnight, which was pretty cool. Totally. Um, how's your day going, John? I'm not gonna say, um, this time and I'm not gonna say like a lot either. So , we need to figure out some bet where if I say, um, or like I owe you, uh, a dollar or something every time, which would, which would add up quickly Cause I said like about a hundred times last.
Uh, how, first of all, how did you, how did you, how did you grasp or realize that you've been saying, oh, you said it. I don't realize it, but, um, or like by, I [00:01:00] listened to the podcast and was horrified. That's how I realized it, because I had to edit the podcast because you don't want it to be like, see, there you go again, Kyle.
Um, All over the place. . How about this? Every, for every 10 ums or likes a bottle of Haku. How's that? ? There you go. Yeah. . Yeah. The ha the Haku vodka, which we should have. I, I tell you what, if, if, uh, tally does well and we blow up, it would be so funny to have Haku, uh, sponsor to the podcast for an episode. Let me rephrase that.
When T blows up, , not if it's a question of. It's a question of when and based on, as we said to start, could happen quicker than we even thought for this episode. It won't be as long as the last one. Um, but I'd like to talk about plant, the plant-based milk business. Um, I'd like to really talk about. [00:02:00] My history with it and perspective on it and how we are AP adding value to it with tally.
So I can launch into that. And then John, I'd like you to talk about your, and we'll see if we have time for this, but your approach to ingredients and quality and formulating a product. I got involved in plant-based. Back in 2011 with a company called WhiteWave Foods. WhiteWave Foods, um, was founded by the founder of Silk, Steve DEOs.
Steve DEOs started silk and started plant-based milk with soy milk under the brand name silk back in 1977, and really struggled with selling a plant-based milk to the American audience for years. , you gotta imagine from 1977 there [00:03:00] wasn't many people buying plant-based milk. Steve was a product of the, of the hippie generation.
He's an icon in the natural foods industry, especially here in Boulder. Just down the street from where I'm calling in from today in Denver and. Steve didn't break through with soy milk until about 1993. So from 1977 to 1993, Steve struggled and it's, it's well documented. It's a very fascinating story of persistence, and the breakthrough came when he partnered with Dean Foods.
So Dean Foods is the largest dairy manufacturer in the country, so, Yes, you heard that correctly. The only reason, and I mean the only reason that Silk scaled and soy milk scaled and got into Whole Foods and all those stores was because of Steve's, um, [00:04:00] distribution partnership with the largest dairy company in the country.
right? So, wow. Dairy companies. It's called direct store delivery. What direct store delivery is, it means that you own the sales reps that walk into the store and stock your products. You don't rely on store staff, and you typically see direct store delivery with perishable products that have short shelf life, such as bread.
Eggs and milk. Um, Pepsi and Coke also have their own direct store delivery teams. Those teams go into the stores with their own trucks and stock just your, your, their company's products. And they're typically pretty ruthless. They will, they have been known to expand the set, right? They've been known to go in there and instead of stocking their four facings of dairy milk that they might rip a tag off and make it a fifth facing just because they're in the.
So it's really, really, really helpful to have a direct store delivery team because they work for you. [00:05:00] You're not relying on the Whole Foods guy who is tired and hasn't had his cup of coffee yet to stock your stuff. Your team is stocking your own stuff. It's really expensive though, and obviously there's a high capital cost associated with that.
To having your own sales team doing that. But Steve was smart to realize like that's the only way to make it big. And so he started a distribution partnership with Dean Dairy. So then wherever milk was sold, boom, they, they did four facings of milk, 2% whole 1% skim, plus one facing of silk soy milk, beautiful wind for both parties.
Silk gets to be associated with. Silk gets to get stocked, and it's incremental sales for the dairy guy because he's now selling four facings of dairy milk, plus an extra incremental revenue facing of a a non-dairy milk. Fast forward to 2022, almost 23, where we're at today. Plant-based [00:06:00] milk has taken off, and there's not just soy milk, it's almond milk, oat milk, flax milk, macadamia milk, and then every type of brand within those, right?
None of the plant-based milks that I just mentioned have. Any nutritional value really whatsoever. The only one would be really soy milk. Um, soy milk does have eight grams protein and soy milks do tend to be fortified for nutritional value. Soy milks are also typically drank by older. The older generation because when you get older you, you typically have a less of a tolerance for dairy and these folks are looking for nutrition.
And so over time soy has realized that their target market, um, It is more like the baby, baby boomer generation that's who drinks most of the soy milk in the country and uh, they've decided it to fortify it. But for John and i's generation, twenties, thirties, forties, you know, we drink [00:07:00] almond and oat milk and.
We have never asked it to be fortified. We have never shown any incline that we require, any extra fortification. We're very happy with drinking our almond oat milk for taste and refreshing outcomes. Right? That's what we're looking for, like a refreshing beverage. Can I, there's no, can I just interrupt you for a second Please?
Why, why, if oat milk has such a horrible nutritional profile as, as far as sugar, which is the, you know, the beast in foods these days, why has it become the number one plant? Milk. Why does, why people wanna drink that? I mean, there's no nutritional value. Yeah. What's so good about it? No. Yeah, you're, I thank you for asking that question, John.
You gotta look at the consumer. The consumer is not drinking. It goes to what I was about to say. A kid drinks dairy milk. A mother serves their kid child dairy milk for its nutritional value and because the kid likes how it tastes. Right? You and I. [00:08:00] Drink oat milk for purely taste reasons and often ethical reasons just to avoid dairy or we're, we are cognizant of, um, environmental impacts we do not ask of our oat milk or almond milk.
to provide us with nutrition because you and I are aren't vegan. But if you do talk to vegans, which is why the company Ripple does pretty well, is because they need to intake nutrition through their plant-based milk. Vegans, like are always searching for calories and protein in, in their diet, but oat milk is popular in the mainstream because the mainstream just doesn't ask that much of it Nutritionally.
It's all about taste and some preferences around greenhouse gas emissions. Some preferences around avoiding animals. So plant-based milks have very little protein. Plant-based milks are typically low calorie, um, plant-based milks also. can be very confusing to the shopper. I [00:09:00] mean, if you've been into Whole Foods, you have, I just posted a blog post to my sub, um, the Tally Kids sub.
You can see it on our Twitter feed, um, drink tally. It's a blog post about the de, the dilemma of clean label for plant-based milks, every plant-based milk needs to stand out to you. the shopper. They need to be interesting and have a clear benefit and, and everything else has to be, you know, um, substandard compared to them.
Right. That's sort of always their positioning. So there's this dilemma of like clean labels where you, you have a company like Mulk, you, right? Mulk almond milk is starting to really blow up. They, they've been around for eight years outta Austin, Texas. Um, they're a clean label. almond milk, right? So their whole shtick is, Hey, you know, we don't use any artificial flavorings, no gums, no fillers, no stabilizers.[00:10:00]
They just recently expanded from Sprouts and Whole Foods as their predominant distribution points. , they dropped their price two bucks a unit from like 7 49 to 5 49 and are making a play for Target. And John and I have been texting about it. You know, we're like, oh, yep, we see it. Mall's making their move.
They're going into what we call mass retail, their angle and they're sticking point that the kids are really gravitating to kids being twenties, thirties, 40 year old people.
they're a clean label, but they also have no nutrition. But that goes to John's question earlier of like, why isn't that an issue? That's not what people are looking for in an almond milk. People want, if, if you're buying an almond milk, you want a great taste and a clean label. Now I get it now. Okay.
That's what they're drinking it for. So what they say [00:11:00] on their, and I, I put this in my post, is they, they act like gums and stabilizers are the worst things in the world, right? They're not. Okay. And here's. It's great to be clean label, but you also are just as nutritionally inferior if you do that. I made a plant-based milk nutritional database, and actually it's posted on drink tally.com.
Milk is at the bottom right. milk has no nutrition. It has like two grams of protein, has no vitamin package. It has, um, no oils or there's no, there's no nothing that we put into tally is. Does it taste good? Okay. It tastes great. , I'm not gonna lie. It tastes great. They, they, they do a great job of adding in a ton of almonds, um, and having a, really investing, you know, in the, in their cogs in terms of putting a lot of almonds in there.
Is that something you have, like with Syra [00:12:00] cereal or a cup by itself? And what's the, how many calories is one of them? milk is low calorie. Um, milk is probably about 120 calories, maybe less than that actually, uh, per serving. Um, still, but, but, but you know, having, having 120 calories with zero nutritional benefit, I would just have a piece of chocolate honestly, equal to that and enjoy it.
What, what, what do you, what is a consumer gaining by Literally just, you know, having a cup of almond. Right. With, with just calories in it. I don't get it. I really don't. You don't get it. You what? What don't you get about, about like why it's the same thing that people drink like a can of cola. Like what do you get from a can of Coca-Cola?
Like people aren't looking to be perfect all day every day. Yes. No, so I mean, in that case, I would have a can of Coca-Cola. Like, you know, I watch, I, I count my calories every day, right? I, I'm, I'm, you need macros? I'm, well, I'm not on a keto diet, but I count my calories and I, you know, I make sure I'm [00:13:00] within that.
I'm not gonna waste it on some stupid cup of almond milk when I get no benefit from it. Mm-hmm. , I'd rather have a piece of chocolate. Right. And enjoy it like, you know, at least me. Yeah. No, I, okay. For, we're talking about a beverage versus a candy for one. So let's just go to the beverage side of things, . Um, let's say you are thirsty and not hungry, right.
What would you choose instead of almond milk? If you needed something to go on your cereal and you didn't drink dairy. Got it. So if you put it applying it to a cereal, then I understand. Yeah. But if you're just gonna have a, you know, cup of it, just to have a cup of it, uh, you're not getting any, anything with calories.
I'd rather have vodka. Yeah, I do see what you're saying. Like drinking. I, I see what you're saying. Like when you're drinking a random glass of almond milk, it's really just to satiate your thirst, I would say. Um, [00:14:00] it's to satiate your, your thirst. I mean, if you like almonds, fine, but I have water instead. I mean, I don't get it.
I really don't. Makes no sense to me whatsoever. It's just a trend people are following just to say they're doing it. They're not, they don't know. They don't know what's better, what's what's, you know what I mean? I don't know. . Yeah. I mean there is an element of that where people aren't really potentially aware that they're really just consuming empty calories.
Um, that's all it is. That's my point. . Yeah. You could just as easily satiate your thirst with a glass of water versus almond milk and save yourself the 40, 50, 60, 80 or a hundred calories depending on if it's flavored or sweetened or what's, honestly, John, what's quite poor for you is if you drink, and this is any folk, just turn over your carton.
If you have this in your refrigerator flavored almond milk. Quite bad for you. Uh, sugar content probably is crazy. The sugar content, it's in the 20 grams per eight ounce. Yeah, it's in the mid [00:15:00] twenties. How, how do, how do these big CPGs get away with it? They're, they're killing the consumer, honestly.
Killing Well, what's, they're making a ton of money, uh, the, uh, the cogs. That's why I, I respect. Milk is an almond milk brand. And respect 'em mal organics.com. Their product is organic and they actually put a lot of almonds in it. And that's where I wanna flip it over to you, John, and as we, as we've kind of gone through the history of plant-based milk to where it is today, explain the formulation elements of tally.
Yeah, absolutely. So, uh, a little background of, you know, what my, uh, how, how I formulate or how it got into formulation, so everybody. , uh, I've been doing this for probably now, formulation wise,
four years. Uh, I basically originally started out, my, my [00:16:00] first company in food was basically real yogurt, right? So dairy yogurt, it was, it was called a labine. It's spelled L A B N E H. It's a middle Eastern strain yogurt. that Okay. Is to be, you know, used as a spread like cream cheese. So I, I basically interesting.
Came up with an idea to do that. And from there, uh, you know, I, I, I basically dropped what I was doing as kind of seren, serendipitous, is that the word seren? Serendipitous how I got into the food business. But it's good. No, it it, it's the right word and it's a good word. Nice. Strong work. That's another topic to discuss later, but basical.
You know, got in the food business and the idea of yogurt came, which is a whole topic by itself. And, you know, saw Shani, how they succeeded. Got into, uh, basically every day, 12 hours a day, 14 hours a day, loving reading, researching, finally found [00:17:00] co-packers, you know, reached out to, to, to people to make our, make the product that I had in mind.
Then, And finally, I, I landed to a small farm in upstate New York, in a town called Argyle, where basically there's 3000 humans in a town and about 10,000 cows. So there's more cows than humans. Uh, two days later, drive to the the farm. It was a beautiful. In the middle of nowhere, cell phone doesn't work there.
Met with a couple, tried their yogurt. It was outstanding. Outstanding. So basically at that time I formulated, you know, uh, flavors that are Persians in infused flavor like Rose, rose pet, uh, Persian lime. We had, you know, uh, unique flavors that, that, uh, basically didn't exist out there. And, and it was delightful.
Full fat yogurt. [00:18:00] Full fat, like 10, 10 grams per per serving. With our sweet, delicious, uh, flavors. And those flavors actually were jams that I bought from a, a jam manufacturer that was Persian. So right away we start production like within, within six weeks. The thing is they make it in glass. So went to the market and our products are flying.
We got into, you know, north H Foods northeast with this is all within like a, uh, four month period. We got into, you know, probably. 800 independence across the, the East coast. I'm like, okay, there's something here. So the lady tells me, you know, we wanna grow, this is the elderly later lady. They have a little small like shop where they make everything, uh, U S D A certified shop.
Uh, they, they strain about 150 gallons per batch. And basically, I. You know, she's telling me I wanna grow the, our, our, our, our factory. But there's, you know, we don't have the [00:19:00] money. So there's a building across the, the highway over here in the town of Argo. They, they, they, they basically are selling it.
It's like, uh, former, uh, pharmaceutical plants. And she's like, can you, you know, uh, can you look at it? I'm like, why? She goes, you know, we wanna buy it. Maybe you have interest to partner with us, or whatever. So, Come back the week later, she makes an appointment, go visit it. And you know, she basically wanted to buy the building.
Uh, and then eventually she couldn't raise the money. My partner and I at the time, uh, at that business raised, you know, the cash, it was, you know, basically 400 K in a matter of one week. We raised that money and bought the building at a discount of really 70. My partner and I at the time, uh, when we started there, we rented a house that, uh, basically we were [00:20:00] paying 1700, $1,700 a month, uh, in that town.
And after two weeks for like, why are we paying rent here? We had this whole bill big building we bought that was 85,000 square. Of space or like, screw this. Okay, we're gonna go live in the building. . . Yeah. Just carve out a little, couple drywalls. Exactly. Two weeks we gave up our lease. Two weeks later, we're in the building.
This now is around like October time is starting to get really cold. We didn't realize that, okay, we just, now they're gonna live here. We have no heat, right? We need heat. So we started heating the building for the first winter. It costs. 50,000, 60,000 to heated, and then after that winter, we never heated again.
We basically lived in the cold, uh, building for, for the next four years while we, you know, produced outta there. So we spent a lot of money into that building, a lot. It was [00:21:00] a expensive, I would say, lesson not to manufacture yourself. Work with co-packers, literally two years later. Now we're in 2018. , I, I exaggerated when I say 10 years ago, I started, it was actually a little later than 10 years ago, but now we're in 2018 and the entire industry is going plant-based.
At that time, me and my partner, like, uh, darn it, we missed a boat, right? Uh, we just, we just realized if we're going to go this path, it's going to basically, you know, go against the trend. At that point is when I became a f food scientist, right as I do Matt, Matt, crazy. From there started pla playing with chocolates, became a freaking expert, right?
Ordered, you know, half a dozen vanillas from around the world, from Madagascar, from, uh, Tahiti, from Mexico, from the us. So, so, so all that love basically goes, you know, comes [00:22:00] from, uh, a lot of research a. , basically making sure, you know, whatever we have is, is, is number one. Uh, number one, uh, clean. That's the most important thing, right?
Healthy. And you know, the, the best of the best. So what we source, uh, leading to where we are today is basically, you know, uh, the ingredients. Are, are the cleanest in the world. I think that is a good place to wrap it up for today. Um, John, you'll remember promise that he would read a book or at least contribute something to this section this week.
We'll see if he, uh, did in a second. Um, I'm reading the 22, um, immutable Laws of Marketing. It's a book written about 30 years. But it's still super relevant cuz these laws are so true. Um, laws like eventually every category will whittle itself down to two players. If you look at any category, it's pretty [00:23:00] true.
um, and laws like. Being first is best, but if you can't be first, you, you should create your own category. Uh, we're kind of doing that with tally with the chickpea. You know, we're not the first plant-based milk, but we are the first chickpea milk, and we certainly believe that we are creating a whole new chickpea milk category in addition to creating the first kids plant-based milk category.
So the 22 Immutable Laws of Marketing has been a wonderful little read for me this week. What about you? Yeah, no. So when I go to sleep around 1:00 AM there's no time for reading. So unfortunately , I'm gonna try for next week. Okay. It's all good. Keep working hard. Um, in terms of tally, how's that monk fruit looking man?
Uh, it, it's in customs right now, so we should get it probably this week. And then how's our production date looking? Looks good. Two weeks from now. We're super excited to be producing Tally on [00:24:00] December 29th, 2022 at our premier production facility. Thank you, John. Thank you for the background, the history, and the story of how you became a food formulator.
Um, hope you guys enjoyed my background in terms of plant-based milk and explaining the plant-based milk marketplace, and we will see you all. I don't think we'll link. Next week, John, but probably see you guys the week after the holidays, maybe after we've produced, um, and we'll have Susan Marie Flugel our nutritional biochemist on the podcast to explain the vitamin package.
Sound good, John? Awesome. Yeah, absolutely. Thanks. Good rest. We'll to Hi, morning.