Heather K. Terry is the Co-founder and CEO of GoodSam Foods, a sugar-free, equitable, and B-certified chocolate company that partners with global farmers. Her first entrepreneurial venture was as the Founder and CEO of NibMor, an organic vegan chocolate company that she later sold. Heather has over 10 years of experience in the CPG industry, having held leadership positions at S.W. Basics and BeyondBrands. Heather’s interest in natural foods developed after witnessing her father’s struggle with terminal lymphoma. She is a thought leader on natural products, a CPG mentor, an angel investor, and the author of From Broadway to Wall Street: Cautionary Tales of an Unlikely Entrepreneur. Heather is also the host of Scaling with Soul, a podcast where she shares her business knowledge and experience.
Here’s a glimpse of what you’ll learn:
- Heather K. Terry muses on her background and journey into the CPG industry
- The inspiration behind GoodSam
- What challenges did the company initially experience before going to market?
- Heather’s insight into raising capital for emerging brands
- Is debt detrimental to a small business’s survival?
- Heather expounds on the future of GoodSam and trends in the CPG space
In this episode…
Equitable food companies are businesses committed to providing healthy, affordable food to everyone regardless of income or social status. In this economic climate, how can food companies produce safe and edible products and earn a profit?
Heather K. Terry, a chocolatier and CPG entrepreneur, recommends using a “good sam” supply network. This type of supply chain allows sourcing ingredients from local farmers and producers. Through these efforts, companies pay the workers a fair and livable wage, building a thriving economy. Equitable food companies benefit the environment by producing food sustainably and reducing waste.
In this episode of the CPG Troublemakers, Steve Gaither interviews Heather K. Terry, Co-founder and CEO of GoodSam Foods, about the benefits of direct chain supply and regenerative agriculture. Heather addresses her introduction to the CPG industry, the inspiration for creating GoodSam, and the challenges the company experienced before going to market.
Resources Mentioned in this episode
- Steve Gaither on LinkedIn
- Heather K. Terry on LinkedIn
- Heather K. Terry
- From Broadway to Wall Street: Cautionary Tales of an Unlikely Entrepreneur by Heather K. Terry
- GoodSam Foods
- Thrive Market
Sponsor for this episode…
This episode is brought to you by 1o8 Agency. At 1o8 Agency, we are a holistic digital marketing agency that cultivates brand growth through creativity and innovation. We jump right in to create solutions with measurable marketing intelligence.
The result? Our clients see increased engagement and increased e-commerce traffic, which equals more sales and profitability for our clients.
Welcome to the CPG Troublemakers. The place where brands and makers, food and beverage nerds, and investors all gather to cause a little bit of mischief. We welcome industry leaders, whitespace thinkers, and channel partners to come together to turn problems into opportunities. Or, at the very least, have a little fun along the way.
Steve Gaither 0:26
Hello, I’m Steve Gaither, and welcome to CPG Troublemakers, where food and beverage brands, investors, and service providers get together and cause, well, a little bit of trouble. And here’s my shameless plug. I am EVP of Growth and Strategy for 1o8, a creative-meets-commerce agency that focuses on brand strategy, package design, direct consumer, and Amazon Marketing for the CPG industry. And we can be found on the interwebs at 1o8cpg.com. I have the pleasure of hanging out with Heather Terry, a friend and a bit of a hero of mine as well. Chocolatier, entrepreneur, a CPG leader, a leader of CPG leaders, an investor of CPG, backed entrepreneur and CPG leader. To say she knows a bit about consumer brands and supply chain would be about the biggest understatement ever. Today, she is Founder and CEO of GoodSam, a brand focused on growing sustainable farming, transparency, living wages throughout the planet and providing great products that consumers can trust. Ah, Heather. Hi.
Heather Terry 1:30
Steve Gaither 1:32
I did a really poor intro. But…
Heather Terry 1:35
No! It’s like one of those things where you as a person doing all the things I’ve done in the last almost 15 years in this industry. Some days you’re like, man, nothing’s happening. I haven’t done anything. And then you put it that way, Steven, I’m like, a badass, but sort of cool. Like
Steve Gaither 1:52
You are a badass.
Heather Terry 1:54
That Alright, let’s go right. Thank you. I so appreciate it.
Steve Gaither 2:00
Well, so happy to have you here and tell me your story, man. I mean, obviously, I want to end up with GoodSam and how you’re gonna take over the world. But how did he get here, man? Yeah. So
Heather Terry 2:12
I’m from Chicago. I hail from the south side of Chicago, southwest side Tinley Park representing. And, you know, I came to the east coast in 2001. After I graduated from college, I was an actor actually, some people know that about me. A lot of people don’t know that about me, I was an actress. I went to go do my graduate degree at Mason Gross School of the Arts at Rutgers University. And then I was a professional actor in New York for seven years. I was on All My Children, I did lots of commercials, I did Broadway. And then the housing crisis happened. And that was a huge blow to the entertainment industry in general. So it was very, very difficult to find work. And I’m a big fan of the saying that goes be a participant in your own rescue. And so I I had an idea, you know, I didn’t want to go back to waiting tables, because I was an actor and I was a working actor. And I was constantly going in and out of a bar job and you know, doing all that thing. And I wanted to stop that like the worst possible moment, it was to stop doing that I wanted to not have that be a part of my life anymore. And so I decided that a great idea would be to start a company, a chocolate company. Like, why not? Like being an actor is its own shade of like, oh my god, how am I going to live and then being a CPG entrepreneur is another shade of oh my god, how am I live? But or how am I going to survive? How am I going to make it you know, you don’t realize when you start a food company, or a beauty brand or especially a beverage brand, God those guys like, let’s just watch money on a sidewalk. But you don’t realize you know, that you might not be paying yourself for a long time. And I didn’t and you know, we started NibMor in 2008, 2009, and we we ran with it. I was sort of ignorance was bliss. In starting that company because I had no idea what I was doing. We we were very green Jen Love, my business partner was amazing. She had a business background, so she kind of but she’d never been in CPG right. So we were navigating this whole thing together in a way that was completely spontaneous. And this is back in the day where, you know, you’d walk into a grocery store and be like, Oh, hey, I’m, I’m making this would you like to take it? Put it on your shelf and, you know, walking up and down the streets of New York City doing that I was hand making everything the first couple of years it was just a total shit show for lack of a better word. I mean, Jen and I look back at it and we muse at like how this brand even still exists today. You know, NibMor still exists today. Yeah, wild to us because it was such a lark. You know, we Really, we’re just flying by the seat of our pants and of course, learned a ton in those years, you know, built that brand. So you know, sold that brand off to our investors, I left in 2015 and went on to just really advise CPG brands, primarily female led, helping them, get their financial house in order, get ready for investment, learn how to talk about raising capital. All of that which had been so difficult for me in those years, you know, it was just so foreign. Such an odd thing to see that happening around me, like what you when you have to go ask people for money, you have to come out with something like what does that mean, right, and then thinking back to those days, you know, all the CPG companies that we knew, and that were part of our network, and the low margins, and like the stuff that we survived through was just, it’s astonishing that some of those brands still exists today, you know, so it’s, it’s, it’s cool to see some of us have, you know, some of surviving from that. And so, you know, fast forward to today, I ended up becoming a consultant at beyond brands with Eric Chanel, and Marcy Sara off. And one of the first projects that came across my desk was a supply chain in Colombia. And you know, I had done a lot of supply chain work at NibMor, I had traveled in the field, we worked with cacao in the Dominican Republic, Peru, Belize, we did coconut sugar in Bali, we had touch points. But one of the things that always bothered me about supply in those days, Steve, was that I could not actually get to the farmer, we had layers and layers of middlemen through that system. And I saw that in many, many other businesses that I advised. And so what happened there was that we had this idea that, you know, the war had ended in Colombia and 2017, there was a way to get directly to farmers, especially in cocoa and coffee. And we were able to do that. And so this idea that we could build a direct supply chain, or as we call it, a good sam supply network, because we treat our farmers completely equal to all of the employees that we have at GoodSam, there’s no less than right farmers are making a living wage, they often make two to three times more than they do working through middlemen and brokers, with GoodSam. And we, we also prioritize regenerative ag because the majority of the communities that we were working with were completely untouched, very remote communities indigenous, no accessibility, so these really bio diverse systems. And so we said, Okay, could we do a regenerative system directly with farmers and bring products to the market that consumers basically already understand, but want that transparency and efficacy with and that was really how the brand was born? And that’s how we did it and Thrive Market was a big supporter of us and, and that’s really how we got off the ground.
Steve Gaither 7:59
Well, um, was it really a conscious capitalism play? Or was it you saw a product? Tell? Yeah, how did Good Sam come about? Right? So the
Heather Terry 8:10
funny thing is, like I said, it really knocked me over the years that the middlemen and brokers in the system and understanding that farmers really weren’t seeing a lot of that money, even in a Fairtrade quote, unquote, system, right? That often those Fairtrade dollars don’t actually trickle down to the communities, they don’t actually trickle down to where the need really is. And so I started to develop a thesis that, you know, I thought, Okay, well, I could go like I’ve done my entire career and pay out the fairtrade group’s the 1%. But what if we were really committed to the communities that we work with? And we took that 1% In totality, and we deployed it, where we were working? Absolutely, right. That’s a little different, right? Because when you pay Fairtrade brands are paying a licensing fee, you’re paying a licensing fee, just to put that on there and say, okay, the brokers, the middlemen, the whatever, they’ve got it like they’re doing it, it’s happening. But what we don’t realize is a lot of that trickles down to the bureaucracy, right? Office buildings, travel audits, all these other things that aren’t actually what the community needs, right? So not every cotton and that’s not demonizing Fairtrade, that saying, we had enough buying power, and we had enough understanding of how it worked to say we’re going to pull that money out and deploy it into the communities. And so for me, that was really, really important. Because, you know, back in 2008, there was no sight sight line on that, right. Also, even in 2008, I was one of the few women traveling in the field and I’m still one of the few women traveling in the field, and my team is almost like our team at GoodSam is 90% women, our head of sustainability is a woman, right? It’s very rare to see women in the seats and doing this job within communities and traveling to very remote, sometimes dangerous areas of the world in order to pursue what it is that we’re pursuing. So, you know, we just took a very different approach to that. And, and it’s paid off for us because it’s really developed trust, confidence, a growing system, right, one of the biggest threats to our businesses as CPG owners is supply. And we learned that in the Covid pandemic, right, we learned that supply was actually very volatile. And for us as a business by going direct, developing those relationships, developing those communities, growing those communities, continuing to spread, you know, a wider net within communities and onboard more and more farmers into the associations and cooperatives is a way to actually not only build confidence in those places, but also protect our business for the long term.
Steve Gaither 10:56
Now talk to me about those first trips, right, where you actually went over there, you probably had a setup problem solution in your head and match that up with reality, what was the real situation and problems compared to your perceived and talk about some of the impact?
Heather Terry 11:13
I mean, first of all, I never thought about going to a place like Colombia. You know, Colombia was sort of off limits for a long time. And now, and even to a certain degree, you know, working directly in country in any country is still very difficult. We just, there was an opportunity at that moment. And so We seized it, right. And we were able to develop these relationships and create something which at the time, I would say in the early days, it was a pretty big shit show, you know, you’re trying to develop trust, you’re trying to, you’re one of the golden rules that GoodSam is never make a promise you can’t keep. So we are either very quiet in the field, if we’re not sure what we can do there. Or we can be very bold, if we understand what it is that we’re doing there. And that we’re certain with absolute certainty that we can deliver on the promises that we’re bringing to that community. It’s really easy, I think, is as white people, right? I’m gonna say it troublemakers podcast. So I’m gonna say, as white people to go into developing countries and be like, you get a car and you get a car. You know, you really you Oprah, do Oprah, the hero complex to it, right? There really isn’t. I think sometimes people think that we just show up. And we do that, but we’re not a charity, right? We’re a business. And so it’s really about, you know, the cash that’s deployed is that 1%, it’s the 1% of our top line sales that goes back into the community, they’ve earned that they’ve earned that money, right? So when we deploy into projects, it’s very democratic, right? They sit around the table with us, we decide collectively, what that project is going to be, how that money is going to be deployed, the communities participating, we’re participating, we bring third party actors to the table to participate in that implementation, right. But we also want to make sure that we’re not like an NGO, bringing our technology, our stuff that’s not easily maintainable by the community. So it took some time, right, Steve, to make sure that they understood that, like, Hey, we’re gonna give you something not only that you can implement, but that you can take care of into the long term. And you can trust us, we’re going to continue to deliver, we’re going to continue to show up, this is not a one time thing. So you can imagine the first couple times, right, like, kind of the like, oh, wait, she’s back that white woman’s back. What’s she doing here? Why is she here? You know, and also, you know, I think for us, one of the big things that I realized early on was that I could not just show up like GI Jane, it couldn’t just be Heather riding on her white horse, I hired a you know, we have a big team of Colombians, we have a big team of Kenyans in Kenya, we deal with, we want to understand those cultural differences, I often sit very quietly in the field, letting my team do their job, because, you know, I am not privy to all the cultural intricacies that are happening, especially when it relates to indigenous communities, right, where there are a lot of cultural differences. And you have to be a little careful about how you ride that line and understand those, those complexities in order to be a good partner. Right? So that’s another piece that we deal with very carefully. And I’m really proud of my team for the way that they handle that, you know, dealing with the cultural differences and also how we frame our work in the field.
Steve Gaither 14:40
Now, you sort of grow in multiple categories and lack of better term TDP: total of distribution points, which for the crew is number of doors times number of skus, so you’ve sort of expanded out has that come from the typical approach of hey, let’s look at the data the way cinco or is it more supply chain and opportunistic or a combination between the two? It’s both.
Heather Terry 15:05
So we GoodSam, we believe that if we believe in regenerative systems, we have to take all commercially viable products off those regenerative farms like why would we promote regenerative systems and say, I just need cocoa from you? Okay, well, if you’re growing cocoa, and coffee, and honey, and panella, and whatever it is, right, let’s go see if there’s a market for that, can you successfully market that so we don’t take everything, but we are taking the majority of high driving crops. And so we play in coffee, chocolate, nuts and fruits currently, and we do do some private label where we have some seeds that we also work on. But that is a completely separate project for us as a business.
Steve Gaither 15:47
Now, so you’ve been doing this for quite a bit; what is the benefit? If you were a superhero, you could be hindsight woman. Having that benefit, what have you done that has had the biggest impact and that you want to do more of? Was that a? Was that a real question?
Heather Terry 16:04
No, I, honestly, the impact projects that we do on the ground are the most fulfilling, right? They’re so fulfilling. And I think what consumers are starting to understand about GoodSam is that truly, when they pick up that bag of macadamias, or a chocolate bar from us, or a bag of coffee, it really does have an impact you internally, we talk about driving sales to create impact, right? We can’t have that it’s like the impact piece is the very romantic piece. The sales piece is always the challenge piece and a CPG company. And so it’s you know, that’s the hard part is doing the real work on the business side, the fulfilling part is the impact side. So you know, the daily nitty gritty, I’m often often saying to my team, like, I know, this is the part that is hard. And this is the part that is that is difficult. But this is the part that drives all that stuff that we do out there. And it’s just so so important to never lose sight of that. I think we’ve seen examples, and I won’t name names, but we’ve seen examples of brands flaming out, who only prioritize the mission piece or the you know, and that’s great, but then go raise a charity go be philanthropic go, you know, work for an NGO, if we’re going to relate mission to consumer goods, we have to tie it to the metrics, and we have to tie it to how we run our businesses or otherwise it will work it will flame out. And that for me is always my greatest fear, right? That that we are balancing the impact and the strategic way we run the business, it’s really, really important for us.
Steve Gaither 17:37
What’s interesting, too, is I think there’s sort of a quantum shift happening slowly. But the idea of upcycling, regenerative, etc, has always almost been a back of the pack play. And the reason for that is even very good people where they go to the grocery store is probably the most selfish they’re ever going to be in their life, right? They’re flying by the shelves, and 20 miles an hour, two minutes per hour max, they don’t have time for education or stories and they’re late to take Jimmy and Susie as a soccer practice. Right. You are one of the few brands that I have seen it from a real perspective and successful perspective of bringing that to front APAC and really getting that story. How is that? Is that been a slog for you? Or do you see that as starting to hockey stick and the rocket ship is starting to take off and people are getting that ship now?
Heather Terry 18:32
Yeah, we have a couple of big national launches coming up in the fall that are really putting us on the map and I think the buyers and thank goodness there are such aware buyers now. Unlike the way it maybe was you know, 10 or 15 years ago where there was some trepidation there are some caution we have some great buyers in some big national accounts that really believe in what we’re doing and they really understand what we’re doing. They love that we minimize our logo and lead with small farms because the consumer really understands small farms. They understand that they don’t necessarily know when they pick up GoodSam initially what that means but they do understand that something’s happening. And so oftentimes you’ll see people talking about us online you There we go. I love this product is so delicious, and they support small farms, and that’s like all they have to say about it because they don’t really understand the intricacies. But I think that is such a I think that’s one of the smartest things we did was lead with small farms because I think the consumer is just so curious and they want to support something they want their purchases to matter. They don’t always know how to do that. They don’t always know who’s telling the truth and who’s not telling the truth. You know this thing called a cell phone has made that a lot easier for them and the the outrage that happens when a brand isn’t really walking the walk doing what they say they’re going to do is it just escalates faster and faster as time goes on. So it is really important as a brand to make sure that anything that you’re saying you’re doing and that you were doing to the best of your ability, and that you’re publishing the results of that, and you’re talking about it actively, and you’re showing it, right, that’s so, so important in this day and age. And so I think like, I think for us on the retail level, you know, the buyers have really understood that even in the early days, you know, we’re distributed nationally with Sprouts, and we’ve seen some compelling data that the consumer is picking it up because of small farms, and because they believe something good is happening there. And that’s awesome, right? We’re happy about that. Now, as we grow, it’s going to be about telling more and more of that story so that they really feel like they’re part of something, they’re part of the movement, they belong to something that is greater than themselves.
Steve Gaither 20:48
Well, I’m going to put you in the category of emerging brands, if you ask 20 people when an emerging brand is you’re gonna get what 25 different answers. But you are, like many brands right now. And the fact that you have this you’ve were an entrepreneur before you’ve been privy to multiple entrepreneurs, relatively unique environment, right, with capital raising, right? The ideas of hockey stick brands up into the right, going through distribution through revenue terms, were basically on their on on the brand favor, maybe in the past, you know, with multiples, but all of a sudden, now with the working capital crunch, that’s more expensive. Investors have been sitting on their wallets, they might be losing and up a little bit. The same investors that might have invested on a Forex even 18 months ago, they’re re upping on that same deal at one or 2x. Right. From the founders perspective. What’s your thesis on how working capital is going to be treated today? How investments can be treated? How is that working in real time? And shoot me some thesis?
Heather Terry 21:55
Yeah, I mean, the first thing is like, I’m not a very romantic founder, unfortunately, because I’ve seen the shit, you know, I’ve seen I’ve been, you know, I like to apparently suffer a bit because I started my last company in the housing crisis and the recession. And then of course, I started this company during Covid. So it you know, I must be a glutton for punishment for something, Steve, I’m not really sure. But I like a challenge. And I I created one brand that survived through all that and still survives today. And it was no different here. I mean, it was, we saw a need in the marketplace, we saw a different way of framing a business one that I hope a lot of other entrepreneurs steal and and copy and say, Yeah, we need if we’re gonna be a regenerative brand, we need to do more things out of the supply. Right, that makes sense. And that consumers can really latch on to and say, Hey, I, I’m supporting this for the human equity and the the eco equity, right? The the planetary equity, that that is something that I really support. I think consumer trends are moving in that direction. As far as raising capital right now. You know, it’s a really strange landscape, VC and PE really only entered the natural products industry back in 2010 2011. We had never seen money deployed that way, in food necessarily, especially natural products and natural products industry before that was, it was very hippie. I mean, I remember my first expo being one floor in the Anaheim conventions, I tell the story all the time. We were next to like Mary’s Gone Crackers. And there’s this big company that we you know, there were so few companies back then. And I remember the first set of suits walking onto that floor, to start to deploy real money into this industry, which I think has been a blessing and a curse. Trying to fit food companies, food, beverage, even beauty, into this model has been very, very difficult because there are just so few companies that can actually meet those multiples. And I think that’s what the community is understanding now, the investment community, they’re understanding now that maybe these are longer term players. Yeah.
Steve Gaither 24:08
Oh, yeah. I mean, based on that real Silicon Valley, convertible safe note, the assess, you know, and it is not tech, right.
Heather Terry 24:19
Food is not tech and it it’s a it’s a shame that it was ever treated that way because I think a lot of really amazing brands and founders have left the space and not come back. Right? I am again, clearly a glutton for punishment because I just keep getting back on the horse and back on the horse. I’m like, Y’all get get rid of me. Like, I’ve learned something here. And I’m gonna bring it to the next thing and bring it to the next thing and bring it to the next thing, right? So I keep I keep just kind of coming back in with the knowledge of what I’ve learned, and continuing to take what we’ve learned as an industry and to the things that I’m doing and or the founders I’ve advised or, you know, however, it’s flowed through for me, but I think, you know, we’re kind going into a really different time and I love what people like Elliott Magon. And, you know, take or do with their alternative investment vehicles. I think that’s the way the future for the food industry in particular. Beverage seems to still be doing what it always does, which is let’s just again, light money on fire honestly.
Steve Gaither 25:24
I don’t really, you know, I, I never was when when’s the GoodSam sparkling ACB coming out? And? Exactly, it sounds like that’s where you’re going?
Heather Terry 25:33
No, I’mdefinitely not, I never I have no interest. You know, that category is just, I always have such a tremendous amount of respect for founders in the beverage space, because they are even more so than me, like get back on the horse, because we can do it. They’re, they’re these eternal optimist, maybe to a fault, right, and the millions of millions of dollars that get that get poured into those companies, it’s just unfathomable to me, you know, versus food, which has to be a lot more strategic a lot slower, a lot more thought out, right, so that you don’t blow your load kind of all at once. So I think, you know, I think we’re going to see more alternative vehicles, like the TIG vehicles, these longer term plays, I think we’re going to see more investors with patient capital coming through the door, I think brands are going to have to rethink growth strategies, you know, I find it hilarious whenever I see a DAC because you know, I’m also an investor in this space, I have many active investments in the space. And I find it hilarious when I see a deck come to me where they’re like, we’re gonna go from 3 million to 40 million in three years. And I’m like, Well, you tell me how you do that sweetheart, because I don’t see it. Like, I’m in it every single day. And I know what going from three to $40 million means and it means like, literally chopping off your limbs to get there. And I you know, I would like to see you as, especially as these first time founders who come in and are advised that way. I’m, I’m always really skeptical. You know, I want them I want because not because I’m trying to rain on anybody’s parade, Steve, but more because I want to see founders really rooted in reality, I want them to make their errors, I want them to be successful, I want them to find the right investors, not the investors who are telling them what they want to hear, or financing them with, like, Oh, hey, let us give you this check. And now let us take over your company, because that happens a lot in our space, too. And I don’t want to see that. So when I when I say those things to founders, I’m not doing it to to rain on their parade, I’m doing it to help them see that, like, it doesn’t have to be that. And actually the reality of the situation is that it can be a lot slower. And it can be a lot more intentional. And you don’t have to appease what you think everybody wants to hear from you.
Steve Gaither 27:47
And you mentioned something pre called to. I mean, a lot of times when people are raising capital, I’m I asked the question, why not debt? Right? Especially if it’s cap x or working capital, to me, that’s a debt solution. versus growth capital might be an investment solution. So what’s your latest interpretation or feeling about debt versus equity?
Heather Terry 28:12
I love debt. I, you know, I think it was wrong of us ever to say that debt was the wrong way to go, because it keeps the equity in the founders hands. And in the original cap table, and whoever supported you initially, I think debt looked at is expensive, we have a very expensive debt vehicle, I know how painful that can be. And then, you know, as you grow, and as you change the business, debt becomes easier, it becomes less expensive. And so if you can figure out how to move again, this is not easy. I think oftentimes, people come into the space thinking like, I need a cookie, this is awesome. The whole world is going to enjoy this and like it’s going to be easy, right? It’s not easy. The strategy around this is hard. It’s hard work. It is, you know what we call it good sound like math gymnastics. You know, we’re constantly in math gymnastics going, Okay, well, if we need to borrow this, how are we going to pay it back? And how are we going? strategically? How are we going to move this money around to deal with our debt? Make sure that we’re growing, make sure we’re meeting all of our obligations on a weekly basis? And how do we do that? What levers can we pull pull? Who can we talk to which of our strategic partners can help us out with like longer payment terms or upfront payment terms? Or, I mean, we get so so creative to take on that debt, or that alternative financing vehicle, right? We get very, very creative. And again, I think a lot of founders and especially first time founders, and again, this is not shitting on first time founders that saying Open your eyes, right? This is you’re gonna have to be creative. You’re gonna have to get scrappy, you’re gonna have to dig in there if you’re going to survive. And that’s right. worst of times, right.
Steve Gaither 29:53
Now, there’s there’s two different things that you mentioned that bubbled up one not all debt is created equal, right? coming in with a SBA loan at the beginning, that maybe it’s only a 50k line of credit, but you’re going to grow that to 102 50. That’s going to be prime plus one, right? Which is much different than asset based lending or PL financing, that right now could be 14 to 17, or even higher, right? And that becomes currency exchange stuff you’re paying, right? If you’re stuck with those high interest things, you’re paying today’s profit for yesterday’s interest, right?
Heather Terry 30:27
Well, yeah. And it also depends on your gross margin, and how what are you doing in your shed? And like, Are you growing that gross margin? Are you protecting that gross margin? Are you giving away the farms, every retailer like? What are you doing? Think of it very holistically, right, if you have a higher gross margin, you can probably take on a heavier amount of debt pretty easily, right. But if you have a very low gross margin, you probably cannot, you will probably go out of business, right? So you may have to raise your prices, you may have to look for a more creative way to get ingredients through the door or cost of goods, or you may have to go to somebody else, you’re gonna have to buy a little bit longer. There, there are a lot of different ways to deal with it. There’s no one size fits all, it’s only about what you can and can’t get on your side of the table, right from the people that you’re working with. And then you know, what, what the actual metrics of your business are?
Steve Gaither 31:19
Well, and you mentioned some strategic ways to think about debt, too. So not only getting folks on your cap table, once again, utilizing them as a data source that might be cheaper than some of that, that other debt. Also, your co-man can potentially if you think about use of funds, your co-man is use of funds. You know, you can argue that a co-man should be able to offer you better terms on asset based lending because they own the inventory. So if you can work with the co-man and get your 30 or 60 or 90 day terms, that’s
Heather Terry 31:52
Again. math gymnastics, okay. Can I ask for another 30 days do these guys? What can I do to take off some of the heat in order to meet the obligation and give us a little bit of runway so we can get to the next inflection point. And that’s really how we all have to be thinking about it right now. Because it’s been difficult. Now, I do think that past, it looks like there’s been some movements, it looks like a lot of funds are starting to say, oh, shoot, we’ve got to deploy some cash. We were seeing some movement in the space. We’re seeing some some people come to the table now. But But there’s still I think, look, I think a lot of people already went out. And I think that we’re going to still see a fair amount of companies go out in the next six months before this. So.
Steve Gaither 32:37
Yeah, and I think based on some earlier conversation that you had, and here’s its twofold. One, a lot of the companies and investors were built on growth over EBIT or margins, right, which is a changing practice going back to the change the game. Yeah, it’s, Hey, even on margins are really important, you know, maybe even over ACV, right. And the other thing is, I think you’re right, I think is loosening up. The fact that people got really scared about inflation going up and everything about to happen. And I don’t think it’s, thankfully has been as bad as people thought it was going to be or that it has never really happened yet. And so I think while there’s a new approach to investing that capital, maybe a little bit more, not so Silicon Valley ish. No, no pun against Silicon Valley Bank, you know, a little bit more conservative long term approach for both parties. I think some of those folks are becoming more bullish, right.
Heather Terry 33:44
Yeah. And I think it’s important, especially for the food entrepreneurs out there who are listening this to understand, and I’ve said this a lot, because there’s a lot of fear, and it’s easy to get kind of like locked down in the fear. You know, you have to have a healthy level of fear and optimism as a founder and an entrepreneur, right? You have to, you have to kind of have enough of both to drive you and to understand what you’re doing so that you make good decisions. But remember, this, people will always eat, right? The majority of us eat three times a day. Yes, yes. You know, no offense to my beverage, beauty and supplement entrepreneurs, but like, probably aren’t more on the chopping block when we’re dealing with, you know, what people will and won’t buy in a down market, but people will always buy food. And what I learned in the recession of 2009, with Knitmore, was that people will always buy chocolate. Why? Because if they can’t take a vacation, and they can’t, you know, get their nails done. They want that moment of indulgence. They want that moment of peace of okay, I’m doing something nice for myself, I’m having this moment or I’m sharing this with a friend or whatever it is, right? We learned that in that recession that you know, some some categories are a little more resilient than others. So think about you know, things people are eating all the time. Think about how you can really position your product. You know, that’s what’s interesting for me and this in this economy, I think, Steve, in terms of being in this commoditized category, you know, oftentimes that’s viewed very negatively. But in this economy, you know, I’m like, Look, guys, like people are always going to eat drink coffee, they’re always going to eat chocolate, functional snacks, healthy, more in these categories that people will not stop spending in, even in the most down markets. You’re right,
Steve Gaither 35:30
You’re right. I mean, looking at category data across the board, even with inflation hitting Yes, units are down. Yeah, revenues up, right. So equals about the same.
Heather Terry 35:41
We all raise our prices, so
Steve Gaither 35:43
Well, and finally, the retailers let that happen. Right.
Heather Terry 35:50
So now, theoretically, just really quickly, remember, in the entire world, the United States, the United States spends less than anyone per capita on food. So we don’t really pay the real price of food in the United States. We don’t, we are in we’re always pushing the price of food down. And I have a I have a lot of opinions about that. But my opinion about that is because we push the price of food down, we feel that it is we feel that it is disposable, which is why we’ve also have some food waste in this country, right? In places like Europe, we don’t see as much food waste, because they pay more for food. Right? And so they value it more. And I think we’re coming to a crossroads where we’re going to see the price of food go up and people saying like, well, I can’t really waste that anymore. I’ve got to kind of make sure I eat that get through it are more intentional about what I’m purchasing and why I’m purchasing it. Right. Because we’ve we’ve been in this market. You know, the grocery store was created in the United States to be an aggregator and a chief aggregator of food, we will never, it was never like that before the dawn of the grocery store.
Steve Gaither 36:52
That’s interesting. I mean, bringing food to the level of gas, right? Gas in the US is artificially lowered with taxation, etc. In Europe, you see much higher costs, because they’re the true cost of gas. So it’s you’re applying those same principles to food. That’s cool. That’s cool. never, I never thunk it, man. Troublemaker something to think about law, you got me you got the wheels. Now, so um, so fast forward three years. Right? Where? Where’s GoodSam? And where’s food CPG three years from now?
Heather Terry 37:31
Look, I think we’re seeing a trend in food. Again, I do think that food prices will continue to go up. I don’t think we’re ever going to see food prices as low as we saw them pre COVID. I don’t know that we’ll I don’t know that it’ll ever go back to that in our lifetime. All. All the indicators that I see on my side of the table is that it will continue to go up why? There’s the market piece of it, of course, but there’s also the climate piece of it. And we see that on the ground, we spend a lot of time on the equator. The equator is sort of ground zero for climate change. And we see already how that’s affecting crops, we’re going to see less crops, we’re also going to see farmers and communities start saying we’re only going to sell a top dollar, the tables are turning a bit, right in terms of how the market works. And I think we’re just going to continue to see that more and more throughout throughout our lifetime. Right for You. And I because we’re roughly the same age. So I think we’ll just keep seeing that our lifetime, I don’t think we’ll ever see food as cheap as we’ve seen it in our life. I think that’s just going to continue.
Steve Gaither 38:35
It’s hard being in our 20s. You know, I’m telling you, it’s hard, it’s hard being in our 20s.
Heather Terry 38:42
Things are really difficult. But you know, I think I think that’s, I think that is a given. I do think that we’re going to see different types of financing come through, especially the natural products industry, I think we’re gonna see a flip in it. Again, I think we’re gonna see founders pushing back. And I, at least I hope we do, I think we’re gonna see founders pushing back saying, I don’t want that VC money. I don’t want that PE money. I don’t want those multiples, I’m going to look at alternative financing vehicles, I’m going to look at debt more seriously, I’m going to look at debt as a larger strategy than we’ve looked at before in the past. And really, if we look at historically, the way some of the biggest brands that are still private in our industry have done it. That’s how they did it, you know, so they did it with a lot of debt. They did it with a lot of creativity. And I think we’re going to see the dawn of that in this industry again. So I’m, I’m excited about that. I think I think that’s the right path for us, versus these insane multiples and these big buyouts and you know all of the things that we’ve seen, especially the last 10 years. So I really think that those two things are going to be the big, big differences. I think we’re going to continue to see in the consumer landscape, the desire and the demand for transparency for you know, where does my food come from? From what is in my food, I think we’re going to continue to see that trend, especially in a post-Covid world where people are much more concerned about their health than they ever were before, I think we’re seeing the middle market start to understand they’re either going to pay the doctor or they’re going to pay the supermarket. Right, we’re seeing a big flip. And that, you know, a good Sam, we saw some really compelling data in the first two years of the company where we saw every jump socio economic demographic buying our products, you know, from $50,000 households to $250,000 households, plus, that is unprecedented. We’ve never seen data like that. I’ve never seen data like that in the food industry, right? Where we see these, you know, very what we consider more struggling markets, or low income brackets coming into a premium offering. I’ve never seen that, right? So it’s interesting to see an ad and on top of it, it being 55-plus in age, saying, Okay, well, I’m going to take my health back, I’m going to invest in my health, I’m going to invest in more premium products, I’m gonna invest in cleaner label products, it’s been really, really interesting to see that across the board. So I think we’re going to continue to see that trend through and I think in three years, we’re gonna see consumers holding brands accountable. We’re gonna see brands being a lot smarter about how they deal with capital, I think, yeah, I think we’re gonna see a real influx of that, that’s exciting for me. Because I think for the last 10 years, what we’ve seen as founders come in, and just be like, Okay, let’s do it. And that’s great. And we love that enthusiasm, but that enthusiasm without the right strategy and education is is death to a brand.
Steve Gaither 41:42
Now I dig that and I think that it’s um, I think you’re I mean, over over the past five years, right? The I call it the rise of the conscientious consumer that gives a shit about what she puts her body and her family’s body, how animals and people are treated and carbon footprint is the reason why Whole Foods looks more like Walmart, Walmart looks more like Whole Foods, right? It’s the even Mondelez if you know talking about tapping in what Mondelez was in what Bridgette was doing with SnackFutures was pretty brilliant, right as let’s clean up our existing brands, you know, gluten free Oreo, etc. Let’s invest in perfect bar. And then hue, which even Smithfield right on ABF meat five years ago wasn’t a thing. Now, it’s probably I’m guessing 80 plus percent of the market is ABS meat, right? So it’s really caused us big mush. And now adding other layers on top of that with transparency, the environment impact that’s becoming more and more relevant, not only in the news cycle, but in people’s real life and weather patterns. I think right? It’s just going to continue to become that bigger smush that is no longer the hippie at Expo West 10 years ago.
Heather Terry 43:03
This is the reason also why brands should be fighting for human rights, also, right human rights for our farmers and human rights for workers in general, because the price of food again, will continue to go up access to healthy food will continue to be more and more difficult for lower income brackets. And it’s all connected. It’s all connected, right? And when we think about that, in the US in particular, and that really big incomes have I you know, that is a break. It should be a brand concern. A big one, and
Steve Gaither 43:36
And you’re addressing it. I love it! As always, an absolute pleasure. One last question. I’m naturally Chicago, you’re naturally New York. Why is Chicago’s pizza so much better than New York pizza?
Heather Terry 43:53
You know, I agree because I’m a Chicagoan. I so I can’t we’re not going to get an argument about this. Take the girl out of Chicago, but you can’t take the Chicago out of the girl. Let’s be let’s be real. Okay, I’m still a White Sox fan of errors like I’m all up in it right?
Steve Gaither 44:11
Let’s go Let’s go hang out at Second City so you can relive the glory days
Heather Terry 44:15
like you can’t, can’t do it. So I as much as you know, I’ve spent a good portion of my life now on the East Coast. I’m still Chicagoan at heart so you know, that is always going to be the best 100% can’t can’t beat it.
Steve Gaither 44:31
That is why Heather is one of my favorite humans on the planet. Right there, folks. Thank you very much. Obviously go buy some GoodSam, help out the world, help out some great product that’s doing great things and be a part of the movement.
Heather Terry 44:47
Thank you, Steve.
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