On a tight budget, but with backing from retailers like Whole Foods, the Bandar Foods team’s showing how lean startup ideas could help change how new products get to store shelves.
More about today’s guest:
Announcer: From 2820 Radio in Philadelphia, it's The Build. Conversations with entrepreneurs and innovators about their dreams, their triumphs, and their challenges. Joe: Snacks. We love tasty snacks here in America especially when they're easy to grab off storage shelves. In fact, the consumer packaged goods industry is so huge major players think a product launch with less than $50 million in first year sales is just chump change. On this episode of The Build I'm talking with Lalit Kalani, co-founder of a company that's turning flavors from India into sauces and snacks for notoriously fickle American foodies. Along the way he's figured out how to find the right partners to grow and thrive in a space that's normally dominated by just a few global giants. It's the story of Bandar Foods coming up next on The Build. Lalit: The Build is made possible with support from 2820 Press, providing business consulting and content strategy services to customer obsessed companies nationwide. More information at 2820press.com. Joe: It's The Build. I'm Joe Taylor Jr. joined today by co-founder of Bandar Foods, Lalit Kalani. Welcome. Lalit: Thank you, Joe. It's great to be here. Joe: You make delicious things is my understanding. Lalit: Bold, delicious Indian flavors. Joe: Bold, delicious Indian flavors. How do bold, delicious Indian flavors make their way to the city of Philadelphia? Lalit: Dan and I met, Dan, who is my co-founder, met at Wharton when we were getting our MBAs there. Dan went to an Indian restaurant, asked for hot sauce, they gave him Tabasco. He comes to his Indian friend, me, asking, "Do Indians not have a hot sauce?" I took him to an Indian store in West Philly. We saw a whole rack of Indian chutneys but jarred chutneys and I made him have these flavors and he loved them. They were bold, delicious, unique. He basically didn't know how to use and one of the things we wanted to do was how do you make Indian flavors penetrate in mainstream America. One of the things we wanted to do was incorporate these flavors in people's everyday lives and we put them in a squeeze bottle because Americans know how to use squeeze bottle condiments. We encouraged people to use these authentic bowl of flavors on their everyday food such as tacos, rice, meats, barbecues, so everything. It even goes well in Indian food but we recommend using it with your everyday foods. Joe: The initial product offering looks like and sits on a shelf next to a familiar ketchup bottle. How do you educate people? How do you get folks to actually sample the product? Lalit: Yes. The bottles do sit on shelves. They are either next to ketchup bottles or other hot sauces or condiments. You could find these at your local Whole Foods next to other condiments such as barbecue sauces as well as your cholulas and Tabascos. [Variants 00:03:20] in front of you in isles that you would typically shop in. A lot of the marketing we do to get people to try these products for the first time are in store demos where we have people go and demo for us or represent us. I do demos myself and have people try these products on foods such as their pita chips or crackers or even mix them with yogurt and other condiments to show how it can be used on their everyday foods. A lot of trial through in-store demos and presentations. Joe: Backing up for a moment, you're at Wharton with Dan. Wharton has become a hot bed for entrepreneur activation, lot of great start ups there are coming out of that space. Yet, I have a sense that a lot of your cohorts are thinking about apps and websites and you guys are actually building mechanisms to manufacture sauces and food products. What's that journey been like? What have you had to learn along the way? Lalit: One of the things we've really enjoyed making has been making this tangible product that people can hold, feel, taste. It helps activate the sensory feelings that people have so really getting into someone's mind or basically being top of mind. That's been one of the biggest passions and something that's driven us to create tangible consumer goods. Yes, it's very different from what our colleagues at Wharton created, started up. We entered an innovation tournament at school. We were the only food product, we ended up winning it. It might be because we sampled food but yes, regardless. Yes, it's been a very challenging process in the sense we have not had many colleagues who started with us in the consumer space or food space. We've really had to build our own network who could help us with providing us advice, mentorship in food, consumer packaged goods. It's been challenging. We've had this network at Wharton but we've really to learn more about food and consumer goods we've had to build our own network within that space. Joe: Did either of you come from a culinary background? Lalit: I would say Dan came from a more culinary background than I did. He did a Hotel Management at Cornell for his undergraduate degree and actually managed a couple of restaurants in Las Vegas before getting his MBA. Joe: That's still a world apart from actually preparing a consumer packaged good. Lalit: Completely. It's a very different ... Creating a brand, creating a brand on the shelf, how to get things to move off the shelf, how to get in consumer minds all throughout the country, those are very different challenges that none of us were prepared for but very excited to take on. Joe: Walk me through what the conversation looked like, sounded like where you and Dan are sitting down and running numbers or sketching something out. What does it look like when you realized this could work, this could be a business? Lalit: It all started from that class project I was talking about at Wharton. It was an innovation tournament class project. We had this crazy monkey logo idea. We wanted to put a monkey on a hot sauce bottle. How do we know if this even has legs? Entering it into that innovation tournament was one way to validate this idea or concept. Taking part in that, getting feedback from people, re-entering it week after week with a more detailed plan, coming up with prototypes during that phase, having our friends just try the products without knowing what it is, and seeing them try it on their pizzas and other foods that they eat everyday was for us it's like these flavors work, people are enjoying them. They just need to be in a format that they know how to use. Lalit: We started working on from ... After winning that tournament we started working on, okay, this does have some legs or it seems to have some legs. Let's try and figure out how we can actually make it. It was at that time that Dan, both Dan and I were graduating from school and we had full-time jobs lined up for after we graduated. We decided after we won this tournament it was, "let's try and see what we can make of it." By working full-time we were working with different manufacturers on the site seeing if we could make it. Could this even be produced? Could we put this in a squeeze bottle without adding any preservatives? How could we make it shelf stable? That was, itself, a 2-year process to figure out how to make it. Lalit: After these 2 years we presented this concept to Whole Foods. We were lucky enough to meet them in April of 2013 and they loved the idea. Four regions of Whole Foods picked it up right off the bat. We were really lucky that we were able to validate our concept not only at school but once we were able to get made, validated with the premiere retail chain such as Whole Foods. That really gave us the confidence. It's, "Yes, this idea might have legs." It's still in the concept phase and then putting it on shelves at Whole Foods, seeing that move and actually growing within Whole Foods as our premiere retail partner gave us the confidence that yes, this, we've actually proved the concept. Now let's prove value and make this a real business. That's when we went full-time into the business in 2014. Joe: How did you make that initial connection at Whole Foods? People describe that first big client, that first big buyer as that life changing moment when they knew ... I just heard you say it, that business has legs, right? How did you actually get in the door there to even present it to them? Lalit: We initially signed up with this company called [You 00:09:18] Trade. They are, I would think of them as fair trade but for young entrepreneurs. It's a fairly new organization and they [set up 00:09:26] young entrepreneurs and they happen to have a good relationship with one of the buyers in the North Atlantic region of Whole Foods. We ended up setting up a meeting and presenting to Whole Foods through them and there were other entrepreneurs there as well. Sitting in that meeting, talking to them, and at that point we just presented our concept. We still didn't have product on hand. Literally Dan and I had samples. We put it in a squeeze bottle ourselves right before the meeting and took that concept. Joe: You're making the samples where? Lalit: At our house. Joe: At home. Lalit: At home, just messing around the kitchen. Joe: Cranking it out samples batches ... Lalit: Yes. That's what we took to them. It was really a concept we were taking to them. They loved it, they wanted it, we just weren't ready because it was a homemade sample and we just put product into the bottle right before the meeting. We were like, "Okay. Let's hold on. Let's figure out how to make this." It took us a year after that to really figure it out and make it and then get it to them. That was our initial launch into Whole Foods. Then, of course, once you're in one region that's been validated other regions are more willing to look at you. That's when Dan and I just hustled, cold emailed buyers, made crazy, funny YouTube videos for them in other way just to reach out and have them respond to us. People have really loved the concept and that's one of the reasons why we received, we even received responses to our cold emails. Joe: You're in the pitch meaning Whole Foods, pretty much a cold introduction to a lot of folks in the room probably. Lalit: Yes. Joe: They go from, "Why am I in this meeting," to, "This stuff is delicious. When can we sell it?" You leave that meeting and say, "Okay, now what? We forgot how to actually make this thing." How does one actually go from a batch of sample product made at home to commercially prepared product that's safe to sell on store shelves? Lalit: It's not as easy as you think it is. I thought it was easier, clearly it isn't, it wasn't, it's still hard. I'm from India, born and raised there. We wanted to keep our flavors and product really authentic that's why we went to manufacturers in India who already make chutneys and other similar flavors and products. We went to them, started working with them, started showing them the concept and really started working with them to see if they could even make it. Eventually honed down to one manufacturer who's been a great partner for us so far and worked with them over the last 3 years to get this really made. We've gone from 2 flavors to 5 now. It was a very challenging time, very frustrating ... Joe: What were their reactions? Were they basically saying, "You want to do what for the Americans?" Lalit: Initially everyone thought it was crazy, it wouldn't work. A lot of the manufacturers just didn't have the time to work on with smaller entrepreneurs and small batches. It really took us a lot of time just talking and reaching out to a lot of people being turned away from a lot of people regardless of whether we have Whole Foods or not but really to help build this concept. Finding the right manufacturer was extremely crucial for us. Joe: This process is you've got market validation because you've got a large significant buyer. The kind of buyer that would bring you other buyers because of who they are, and yet you're going to manufacturers and that's the point at which you're hearing rejection. How do you overcome ... How did you go through that process of just getting past no with all those potential partners even though you knew you had an idea that was salable? How did you keep going back to the point where you actually finally found that partner where there's a fit? Lalit: Well, we need to find the right partner, I was also excited on working with new concepts and wants to grow in a place that they haven't been in before. How do you find that right partner? Finding the right fit was extremely important. We didn't want to work with a partner who would just give us a product because we were new, we had a lot of R & D in place. We knew we'd need a lot of their support initially so finding that partner was important to us. When someone said no, it was hard but we really have to find the right fit. It was okay going to other manufacturers and trying to find that right fit. Lalit: In terms of selling, it takes selling both to the customer and the buyers here at stores but also selling manufacturers. We are still very small compared to the other businesses they have and the volumes they do. It's really getting them excited about our brand and our growth because it's not what they see today, it's what they're going to see into 2, 3, 4, 5 years from now that they're investing in. Because small batches for them aren't as profitable either. Really, for them to buy into our vision it was really selling them our vision and what we saw in America trying to grow the business and the brand. Joe: What's the scale upon which you have to work with in overseas manufacturer to make it worth ... I mean do you have to put it on a boat or a plane? How does it even get here? Lalit: It comes on boat on a ship, in a container on a ship. We initially used to make very small batches and fly them, airship them which is very expensive for us but a way to bring small batches over quickly and get them into stores quickly because the demand was there. As our volumes grew we quickly switched from air shipping to sea shipments which is actually much more economical for us. It comes on boats and containers. The volumes to really be profitable and meaningful for a supplier I would say volumes can vary depending on the size of the supplier. I will say where we are today doing about a container, half a container a month which is around 25-30,000 bottles a month is not insignificant. We still not ... Yes. Joe: That's a lot. That's a lot of bottles. There's a lot in that supply chain that has to go into this because from the outset, what I've heard you say, design is very important. You're also doing somewhat a custom design of these bottles, you've got the labels, all of that has to get to the manufacturing plant as well. Who manages that supply chain and what do you have to do to make sure that all those pieces are working correctly? Lalit: Initially it was a lot on our plate finding the source for the bottles, for the labels, the food and the product itself, the inside of the product, the sauces themselves, the manufacturers were the experts so we left that to them. We just had criteria on knowing where their source came from, which manufacturers made the different products, if anything. The actual keeping the products natural and not adding any preservatives. We had our list criteria that we give them and work with them on. Initially sourcing the bottles themselves was on our plate. Now as we've grown and given that it's now a significant number the manufacturer actually himself sources the same bottle from the supplier so it's gone. It's come off of our plate but, so we buy the finish packaged product directly from the manufacturer. Joe: What do you have to do to make sure that you maintain quality control when you've put a lot of this process in the hands of a trusted partner? Lalit: We have, we had to hire a person in India to actually look at and inspect each bottle that's put into the case before it gets shipped here to the US. We have someone on our side actually inspecting each bottle before it gets here. That's one way we keep quality control and quality checks. We can also track back to each batch knowing what product we sold to which customer, when that was made, what batch that was from so we can, we have a good way tracking mechanism of if ever anything were to happen we know how to manage that issue. Joe: You've got all these bottles coming into the States at this point. Now, is it a matter of stealing customers away from a competitor? Are you saying, "Don't get that rooster sriracha sauce. Get ours instead," or are you creating demand for a new experience? Lalit: I will say primarily creating a demand for a completely new experience. I'd say a little bit is off taking away from other competitors because to be as a part of that shopping cart it's going to be us or another unique experience. We are trying to create this new experience, we are trying to build this new authentic bold of flavors that don't really exist today into the shopping carts and into the daily lifestyles. We look at sriracha as ... We look up to them to be what they are today. It has taken them 20 years, we want to do that quicker but we want to do what they have done to bring this authentic, Asian flavor into people's everyday lifestyles. Joe: The initial R & D process was you and Dan at the oven at home working on new concepts and flavor profiles. Is that still your R & D process or has that evolved? Lalit: It's evolved. There is the new snacks that we've launched. We still stand in front of our oven and we create stuff at home but it's now also more on the hands of the manufacturers and the partners we work with. When we have a concept and idea once it's tried at home initially. We quickly then revert back to our partners and manufacturers to see how we can get this made commercially sooner rather than later. We know very early in the process what it's going to take, what it's going to cost, whether it's going to be viable or not. A lot of that process has changed but we still have our kitchen and that's where things and ideas pop up and start up first. Joe: Tell me about that brand extension into snacks because you've evolved from just making the sauces into making some other products recently. Lalit: We recently launched our Lentil chips and our Naan chips. Lentil chips, the Poppadums are Indian inspired appetizer, very popular Indian appetizer. We initially launched them in a Pringles style container. Very unique, again, very unique, authentic chip or appetizer or snack but we want to put it in a format that Americans are used to seeing. Pringles type of container we thought was hey, Indian Pringles. The other chip we've launched are our new Naan chips which are made from the popular Indian flat bread, Naan. We want to be the Indian version of pita chips and pita chips has taken off very quickly over the last 10 years. We want to be that new, we want to get on that Indian food trend and be the Indian version of pita chips. Essentially we want our Naan chips and our sauces to be what, tortilla chips and salsa as to Mexican food. We want to be that for Indian food. Joe: What do I get from a Naan chip that's different from the experience I would get from a bag of Stacy's pita chips, for instance? Lalit: A few things. We make sure our chip was structurally different. It's lighter, it's airier, it's an easier dipping agent. It can also just be something you snack on that's not too heavy or as pita chips get on the heavier side if you can't eat a full bag of them at one sitting. Whereas this chips are actually chips you can eat them in one sitting. It's also 60% less fat than pita chips so it is better for you than the regular pita chip. Joe: In terms of the retail presence, one of the most challenging things for consumer packaged good is actually getting that shelf space. Do you market all these goods adjacent to each other or do they show up in different parts of the store based on the kind of product it is? Lalit: It's a great question and that's the merchandising strategy or something we're still figuring out. Being in this different categories has allowed us to experiment with different places to be in the store. It's been a very positive experience trying to figure that out. Very soon we're going to have to figure out what works best. Currently we are looking at our Lentil chips, the Poppadums, to go sit next to our sauces and brand block the shelf with our sauces and chips. The Naan chips, especially, as we're trying to make it the new pita chip or the Indian version of pita chips, we want to follow what's Stacy's did, which they got out of the regular shelves and caught it in the deli section of the stores. We want to be with the pita chips, next to them and trying to augment that [step 00:22:28]. That's a different area that we are also playing with right now. Joe: One of the interesting things in terms of consumer grocery marketing is there seems to be a lot of competition to prevent consumers from even entering the store. We've got in Philadelphia, for instance, a giant which is part of a [inaudible 00:22:49] they've got Pea Pod, there's FreshDirect, Amazon is in the space now. What are some of the challenges that you see trying to get in front of consumers when there's not specifically a shelf for them to view? Lalit: I think it's actually great for us because our target market is actually the millennials, the younger urban food explorers. We find that a lot of them today shop online and I would say alternate channels outside grocery and conventional stores. This alternate channel is actually something we are looking seriously at because we can reach a larger population faster. It takes a long time to get on the shelves of these stores whereas online you can get quickly into people's pantries and people's houses and people's online shopping carts. We can reach this wider audience and our target demographic that does order online. It's actually going to be a great source or revenue and a channel for us that we've just started focusing on. FreshDirect, our partner that we're trying to work with, we're already on Amazon so you can buy our products off Amazon. Really it's not going to focus for us today but going forward it's, we foresee it being a significant part of our business. Joe: Right now you could go to Amazon, and we encourage listeners to do so, and pick up some sauces and the Lentil chips and the Naan chips. What other things do you think you need to do to raise awareness of the branding, create those opportunities of the sample? Lalit: We're working on ... To sample our sauces we're actually working on a ketchup size packet for our sauces so a small sachet that we could go put at food trucks, at different food trucks in the city so people can sample these products cheaply. That's one way we're trying to build awareness and get people to sample and try the products. A lot of press and PR getting this in the hands of food bloggers to write about it. It's a hard path and a difficult path but it's something we're trying to raise awareness through is through people who lead food blogging and get it out there through them. A lot of in-store demos, as I mentioned earlier, but that does get expensive very quickly. It's a very difficult process to get this in the hands of new consumers. That's our biggest challenge. It's educating the consumers and that's something we have to take on and build as we build this brand or a business because they are unique but that's our biggest challenge today. Joe: We have observed a shift in, I will say, influence from a handful of celebrity chefs and restaurant critics and food critics, too. This rise of food bloggers and foodies and folks I've interviewed on the restaurant side to talk in both loving and hateful terms about Yelp, right? If I'm talking to ... Dan probably he's experienced this from his hotel days, Trip Advisor, right? What's the equivalent of Yelp and Trip Advisor for you? Where do you want to see Bandar Foods show up? What kinds of blogs, what kinds of spaces? How ... What's your dream state for the food to be showing up in people's social feeds? Lalit: We do have a social media presence. We do communicate with some of these food bloggers through our Twitter account, Facebook, Instagram. I still don't ... I don't think there's a Yelp for consumer food and I think that could be a great idea. Maybe a separate business on its own. There are certain collections of food bloggers that you can find in one place so you can have access to them through one place. There are a few websites that do do that. I think in terms of selling product and consumer goods. The Amazon ratings are really important for us because that's what helps you develop that social currency, that feedback you get from consumers as direct. It's very important to track that and manage that and that's, I would say, the equivalent of the Yelp where people can post their feedback pretty quickly. Joe: Where are you getting ideas for new flavors and products? Is that coming from consumer feedback or do you bolt upright at 3:00 AM and think, "I know what to put on the chips next." Lalit: A little bit of both. There's some structure on it because without that we have tons of ideas. It's flavors that we eat everyday. I'm very familiar with from my Indian background, my Indian heritage. I taste a lot of different foods, I try a lot of unique foods. We have a lot of ideas that get inspired from what we live and breathe everyday. We do have a process through which we actually look at data and see what flavors have worked for other snack companies. What's working, what's not working. Trying to limit the number of ideas based on what people might have tried before or not. That's some structure on that process but really the inspiration comes from what Dan, myself, our families eat everyday and what inspires us. It really comes from that internal passion. Joe: In a few years into this business at this point tell me about the most challenging decision that you and Dan have had to make so far. Lalit: I think one of the most challenging decisions we've had to make has been saying no to a customer. We had a very large retailer who is interested in our products. Saying no to a sale is very, very difficult but at the stage we were in we didn't feel like we had the resources to support the introduction of our products into this large chain. To make sure our product is successful on the shelves you have to come do source specific ad promotions, TPRs, or those shelf tags that you see, the sale signs on. Doing these promotions cost a lot of money and given where we are we didn't feel like we had the resources and the money to really back and make sure the product was successful on the shelves. Lalit: One of our mottoes is to make everywhere we go or where we get distributed is to make sure we do well at those stores first before expanding. I think one of the hardest decisions we've had to make was saying no to that sale but overtime we found that that was, that's been very helpful. Now when we're ready to make that next step we're actually reapproaching that retailer and trying to ... We've kept our relationship going, we've managed our relationship, we've kept them up to date with what's been happening. It's been a very close relationship that we've been able to build and some rapport over the last couple of years. Now that we are finally ready, or we think we are ready, we are trying to open those doors again. Joe: What's the biggest area of concern right now? Is there anything that keeps you up at night about the growth of the company or the performance of the product? Lalit: Being in the consumer package space is very cash intensive. It takes up a lot of funds because you're buying products, storing product, selling it, and then having people pull it off the shelves. The cash cycle is long. Making sure you have enough funds to have enough product but also make sure you have enough funds to do the right promotions on the shelf, have that moving, get that moving into customers' hands, having people try it. Funding is extremely crucial and finance is extremely crucial for our business. That's something that we have to constantly keep at the back of our mind and keep that, keep making sure we have the right resources for supporting the business. Joe: Earlier you say one way to think about one of your products was the idea of Indian Pringles. What is your response if Pringles actually rolls out tomorrow with a product that looks just like yours, tastes similar, has the Pringles logo on it? Lalit: I think that would be great because it validates our idea and what they do is they would help create a category of our type of chips, the Lentil Chips or the Poppadums. If they did that we would be a brand competing with Pringles and in a category that's actually been validated by a company, a brand such as Pringles. It would be great because there's still many consumers out there that want small business products or unique brands that bring a unique experience. I think that will really help our business grow in multiples that we wouldn't have imagined. We would actually encourage Pringles to do that. Joe: In many ways it would basically position you at the high end of a validated market. Lalit: Exactly. It would be pretty awesome. Joe: Okay. Perfect world scenario, things like that are happening. You continue to get validation, you continue to grow, you're having trouble keeping items on the shelves because they're getting snapped up so fast. What's your dream for the company? Where does it grow? How does it look in 5 years? Lalit: We want to establish ourselves as a cool, Indian-American crossover brand here in the US. That's what it's going to take us the next few years to really build up our distribution within the US, get it in the hands of consumers, be that premiere Indian-American brand. Because our supply chain is global we have the opportunity to go international. Building a cool brand in America and being that cool American brand really trickles down in consumers and sales in some of the developing countries even in India where I'm from and grew up wanting this cool American brands that were great in the US but wanting them in India. Lalit: Over the next few years we want to build this brand up in the US and then use that as an opportunity to expand globally. We've already started testing in countries like in the Middle East and Canada. Really once we are a cool brand here in the US, a premiere brand here, we want to expand internationally into countries like India, UK, Australia, where Indian food is also more accepted and already a few years ahead of where the US is today. Joe: What makes it a cool brand? What makes something desirable to become a US export? Lalit: It's a lifestyle that we're trying to sell. We want to make this connection between the young Indian-American generation that has this amazing Indian heritage but really how it fits into the American lifestyle and building that connection between those two lifestyles. We really want our brand to be representative of this culture and this great lifestyle. Bringing, making that connection between the two cultures is a lifestyle that we want our brand to represent. That's what we want to sell to consumers. Joe: Fantastic. Lalit Kalani, thank you so much for joining us in The Build. Lalit: Thanks, Joe. Great to be here. Announcer: Thanks for listening to this episode of The Build.