The Next Brand, Episode #20
The Next Brand, Episode #20
Weight loss challenges, fixing your environment and building a big consumer brand
Hi there, and welcome to The Next Brand - my take on health, wellness and brand building.
In the last 4 years I’ve founded 2 health brands (Kettle & Fire and Perfect Keto), which each do tens of millions in revenue. I’ve raised ~$20mm to build Kettle & Fire, gotten into 10k+ retail stores, bootstrapped Perfect Keto, launched 80+ SKUs… and have a small portfolio of Shopify apps I run on the side. Previously, I worked in tech and had no experience in CPG, DTC or any other 3-letter industries.
If you missed past episodes, you can catch up here (Episode 18, 19). Otherwise, let’s dive in!
🆕 What’s new
Health in the US has seriously declined in the last 50 years.
There are a lot of reasons for this: environmental contaminants, stress, poor diet and widespread presence of vegetable oils are among my leading contenders.
At the core, I think it all boils down to this: today, our environment often makes us sicker, not healthier.
What do I mean by this?
Millions of years ago, humans lived in small tribes and hunted/foraged for food. Besides a few naughty berries that made them sick (that culturally, they learned to avoid), the hunter-gatherer environment was one that was healthy by default. The foods they ate, the community surrounding them, time in the outdoors all led to a species-appropriate environment.
When things DID make early humans less healthy, they were often exogenous stressors: wars, animal attacks, drought, disease, famine, etc.
Today, we have far fewer exogenous stressors but FAR more things in our default environment that will make humans chronically ill. Just being healthy today (avoiding processed foods, lowering stress, getting outside) is a near-constant exercise in discipline. Given that, it’s no wonder so many people are unhealthy: their environment is stacked against them!
As I’ve gone deeper down the nutrition + health rabbit holes, I’ve become more and more convinced that education is only part of the problem. Yes, you can tell everyone about the dangers of vegetable oils, but if someone lives in an environment where these oils are in everything and none of their friends care… behavior change will be ludicrously hard.
Increasingly, most humans have never experienced an environment that’s conducive to their health. One without shitty food, without stress and without technologies that peck at your attention. One with healthy food, outdoors access, and community.
To the extent that we want a society of healthy people, I suspect we’ll have to design a healthy environment. One where being healthy doesn’t require diligence, but is the default.
I’ve been thinking a lot about how to design such an environment: start a health-focused community? A city? Do more with the wearable challenge? I’m not sure, but it’s an area I’m actively thinking about.
💪 Health stuff
Walk into a grocery store, and the highest-margin products are those filled with corn syrups, sugars, and simple carbs. Margins on highly processed foods are much higher than real foods: thus, food companies want you to consume their highly processed stuff.
Yummmmmmmmmmm
The same is true of our healthcare system. A healthy human is not the most profitable one.
In general, the incentives in our food + healthcare system are not good. And it's a primary reason why our healthcare costs are spiraling out of control.
Last February, I kicked off a weight loss challenge:
People would pay $950, sign up for Levels (disclosure: I’m an investor) and wear a continuous glucose monitor for the month. They’d then get $25 back for each day of the month their blood sugar stayed below a certain range.
Basically, you have a financial incentive to avoid sugar + carbs for 30 days.
The results of this simple challenge have been astounding. Since last February, we’ve had 412 people go through 10 separate cohorts. At least 20 participants have lost more than 10 lbs, while one even lost 15 lbs in 28 days. The average weight loss for all cohorts has been 5lbs - all without counting calories.
Many participants have gone through the challenge multiple times (including 1 person a record 7 times), have learned a lot about their bodies and used it as a jumping off point for better health.
This has been a really fun way to see the impact aligning incentives has on the average consumer. When getting that cookie suddenly costs you $28 instead of $3, people tend to think a bit harder about whether or not they really want that next sugary treat. It’s powerful: just by assigning a cost to someone’s diet choices, they change them.
This also works in areas outside health. At a time when I was REALLY nervous to approach girls, a friend and I put $100 on the line. If either of us failed to talk to 5 women during a night out, we’d owe the other person $100. 3 years later, I met my now-fiancee by cold-approaching her on the street 🤷.
I’ve since used a similar incentive structure to build a meditation habit, lift at least 3x/week… all kinds of things.
Aligning incentives are so important. Humans were not meant to fight our environment: we were meant to thrive in it.
In a world where incentives are stacked against you and make health challenging, I think there are all kinds of opportunities (like the Wearable Challenge) where you can align incentives and make a habit stick.
🤑 Biz stuff
I’ve started two consumer brands (Kettle & Fire and Perfect Keto) that have each done $100M+ (cumulative) over the last few years.
Since starting, I’ve learned quite a bit about starting + scaling a consumer business. To win in consumer, you have to be good (and a bit lucky). But you also have to be strategic.
I’ve learned quite a bit about launching + growing a consumer brand since launching PK + K&F, and am applying these learnings to the non-alcoholic wine brand I recently incubated, Surely.
Here are 7 things that (in my humble opinion) are critical to building a big consumer brand.
(1) CHOOSE A TREND
Big CPG is incredible at optimizing the hell out of their existing products. They’ve got supply chain and manufacturing know-how for days.
Where they’re less incredible is at innovation. This means they’re often slower to jump on trends than you, scrappy consumer founder, can be.
And this is where you can win. Identify a small but fast-growing trend, and create products that serve the trend. This is how both Kettle & Fire and Perfect Keto got to $10M+ within our first 2 years of operations.
In the case of Kettle & Fire, I saw that people were interested in bone broth and used a landing page to validate there was demand. In the case of Perfect Keto, my co-founder and I were deep in the health world, and saw more and more interest in keto. Many of the influencers and consumers who lived at the edge of the health space were starting to experiment with keto… but there were literally no products! So we made them 😎.
(2) START DTC
DTC is a tough channel to scale beyond $50M or so, but the best channel that’s ever existed to get feedback. Big CPG spends millions of dollars on focus groups to talk to their consumer: you can just send yours an email if you start DTC.
Launch DTC and learn from your customers how they like your:
Product
Positioning
Pricing
This rapid feedback loop allows you to get inside your competition’s OODA loop, and have 10 product, packaging and messaging iterations where your competition has only 1.
Starting DTC also allows you to build a brand without waiting on category managers at the retail level. The bigger the DTC audience, the better your odds of success in retail (and the easier it is to convince retailers that yours is a brand + product that resonates with consumers).
(3) FOCUS ON COMMUNITY
Focus on a few small but intense tribes when you start. Kettle & Fire and RX BAR focused early on the Paleo crowd, Perfect Keto on the keto crowd, Quest on workout junkies.
Starting with a laser focus on 1-2 communities (and getting them to fall in love with your product) will ensure you have a strong core consumer base as you jump into the mass market.
This is also where you have an advantage as a small brand. Paleo is tiny: big CPG can’t make the *perfect* product for a tiny niche. But you can: start with a small-ish market, build a community that loves your stuff, and then look to scale. You can make the best damn Paleo protein bar in existence, and figure out how to expand your market later.
(4) PEOPLE BUY FUNCTION
People rarely buy a product because it’s pretty. However, they’ll buy a product because it has a functional benefit (protein, gluten-free, energy, etc)
Some brands that have done this well:
Vital Proteins sold the benefits of collagen.
Four Sigmatic - mushrooms.
Quest bar - protein
RX bar - clean protein
Oatly - vegan milk
Recess - chill in a can
Find the function your customer cares about, and sell it as your product’s main benefit. Then build the brand on the back of that.
(5) PREMIUM IS OKAY
Once you’ve found the function you’re selling, charging for it is totally okay. When starting out, being the best (and charging for it) is the right move for a small brand. As you grow, you can lower prices.
We did this at Kettle & Fire. The first product we sold (in our current-sized cartons) was $11.99 online. Then $9.99 in our first 50 Whole Foods.
Today, you can buy a carton of Kettle & Fire online or in stores for ~$7. About 40% less than what we charged when we 1st launched.
Why? Because we’re in a world of abundance. Consumers who care about what you’re doing will *really, really* care. And be willing to pay for the best thing in a category. To better understand this point, I highly recommend checking out this piece by Alex Danco.
(6) DISTRIBUTION STRATEGY MATTERS
Your retail strategy really, really matters. Start small, in retailers where you know you can win (where your core customer shops). Prove you can win in 50 Whole Foods before expanding to 500.
For Kettle & Fire, we first proved the brand could succeed in 50 Whole Foods in 2016.
A year later, we went national with Whole Foods and Sprouts. 12 months later, national with Kroger. Then Safeway.
Now - 4 years after we began selling in retail - we’re in 12k+ stores. But we only got there because we showed we could win in 50 stores to start.
If you’re not confident you can win in a given retailer or channel, I’d recommend staying away until you have your marketing/sales/supply chain nailed.
(7) MAKE IT BETTER
The last (and hardest) piece of all this? The product you’re making has to be at least 3x better.
Not like “oh this is slightly better than what I used to buy”. Like really, noticeably, tell-your-friends better than what your customer buys now. Only then do you have a shot at really fast growth.
This was our strategy at Perfect Keto. Our first product was an exogenous ketone product we charged $59 for (compared to $79 for the competition). It tasted better, was more effective, had better branding AND cost less. And did $2M+ in sales in year 1 (for just that product line).
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The next decade will be a great one for consumer brands. Big CPG is losing ground - between 2011 and 2015, $18 billion in market share shifted away from large CPG to smaller brands.
In 2015, 90 percent of the top 100 CPG brands lost market share, with 62 of them experiencing declining sales. And most of those lost sales went to emerging brands.
The Golden Age of consumer is only beginning.
😌 Dope stuff on the internet
Some of my favorite things since the last newsletter (note: I don’t get paid to recommend anything here):
📰 Article - In my last newsletter, I covered how + why beef is not bad for the environment. Interestingly, this article points to our ancestors being faaaar more carnivorous than commonly believed. Though it’s about as popular as the lab-leak hypothesis circa May 2020, the reality is that meat is an incredibly nutrient-dense food that humans are meant to eat. I’m all for a better food system, but one that pretends that abstaining from meat is healthy is just not correct or ancestrally appropriate.
Runner up this month is this thought-provoking post that discusses games the Chinese Communist Party may be playing with the Western financial system. If you’re into finance + economics like I am, it’s a compelling read.
📚 Book rec - If you enjoyed The Martian (movie or book), Andy Weir is back with his latest: Project Hail Mary. I can’t recommend it enough if you’re looking for an engaging sci-fi read.
⌚ Cool product - Now that jorts season is well upon us, I’ve been rocking my Suavs Shoes again. These have probably the highest “tell a friend and they buy 10 pairs” ratio of any product I’ve ever talked about. They’re comfortable, environmentally friendly… just great across the board. I love the gumball sole whites, but all of their shoes are excellent and travel super easily.
🎵 Music - Nora En Pure has been putting out fire mixes for a while, but I’ve only recently started to get into them again. Similar to other mixes I’m into, hers make for great working music if you want to get in the zone for an hour or two.
🏀 Random - A few days ago, I did an interview with the My First Million crew and talked through pretty much everything I know about building a side hustle. If you’ve enjoyed my posts on the 4 Kinds of Side Hustles or How I Validated my Idea for K&F, I think you’ll enjoy this.
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Enjoy the month!
❤️Justin
Hey Justin - would love it if you could write about the process of creating an MVP in the DTC space. In other words: finding a supplier, creating samples, etc.
Would love to learn more about how you think about that part of the process.
Interesting idea about the health focused small city. Have you posted this on Kern.al yet?