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Hello and welcome to The Advice Line on how I built this lab.
I'm Guy Roz. This is the place where we help try to solve your business challenges.
Each week, I'm joined by a legendary founder, a former guest on the show who will help me try to help you.
And if you're building something and you need advice, give us a call and you just might be the next guest on the show.
Our number is 1 -800 -433 -1298.
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And we'll put all this info in the podcast description.
Alright, let's get to it.
Joining me this week is Mark Laurie, a one -time bobsled champion and also the founder of diapers .com, jet .com, and Wonder.
Mark, welcome back to How I Built This.
Thank you, Guy. It's great to be here.
So you were first on the show back in 2021.
And we, of course, heard about how you founded diapers .com and then jet .com.
And if I remember, you got the idea for diapers .com back in the early 2000s when you had young kids and even though margins on diapers were pretty razor -thin, I think at one point I remember an investor had said to you, you were selling a dollar for 90 cents.
You ended up getting acquired by Amazon for over half a billion dollars in 2010, which was an amazing but also I think you had sort of mixed feelings about that acquisition of that end at the time.
I did. I did. You know, we had a big vision for what we wanted to accomplish and it was cut short.
So yeah, it was, I mean, you would think after a sale like that, we made obviously a lot of money, me and my co -founder, but we said, do you want to celebrate?
You want to go grab a drink to celebrate this?
And we're like, nah, I'm like, nah, I don't want to either.
So it shows you what it is to be a missionary versus mercenary, you know.
It's not about the money.
It was about, okay, the dream is basically dead now.
And that was sad. And for those who remember the episode, you went on to take on Amazon after that happened.
You launched another online shopping platform called Jet .com, which then sold to Walmart for over $3 billion four years later and these were just amazing pivots in both of these stories along the way and well worth listening to.
Somebody actually asked me recently, I went and spoke at a conference and somebody said, name five of, just off the top of your head, of the best entrepreneurs and Mark, you were on that list.
No question that I'm gonna view.
In all the 700 episodes of the show.
You were right. You were absolutely on that list.
Before we get to our callers, cause you are going to help us answer questions from early stage founders today, which is super exciting.
So when you actually came back on to how I built this, I think maybe a year and a half ago, you were at the time, we're launching, about to launch Wonder, which it was going to be a business where trucks, like food trucks with full kitchens inside would come out.
You'd order food. The truck would pull up in front of your house and make like a perfect, you know, medium rare steak and perfect crisp French fries and delivered to your door from the truck.
That has changed a little bit.
But tell me what Wonder, where Wonder is now and what, what it will be.
Yeah. So you're right.
It was out of a Mercedes Sprinter van.
So very small space.
We had one piece of electric equipment and the driver had to cook and we innovated for a couple of years trying to figure out how do you cook a steak in six minutes to perfect temp in one piece of electric cooking equipment where the driver has to do it fast.
And you developed all this equipment and all kinds of cool things for this.
Yeah. I mean, we invested a ton in culinary engineering, food science and tech to be able to do that on the truck.
And then at some point we tested a brick and mortar because we realized that we can put 30 different restaurants in a 2800 square foot kitchen with the same two pieces of electric cooking equipment and no hoods, no gas, no chefs.
And we thought, wow, that's going to be able to be an incredible offering where consumers can order from multiple restaurants in a single delivery.
So we switched to that model.
So it is a brick and mortar like a fast casual sort of restaurant where you can sit down and eat, there's maybe 10 seats and then pick up and delivery.
So they are located right in the heart of where people live and we set a really tight six minute delivery radius.
So you're getting the food fast, hot, really high quality.
And of course, multi restaurant.
Was it hard to make that pivot?
Well, did it take you a long time to kind of say, you know what, I'm going to let go of this thing and focus it, focus on this part of it.
Yeah, I think, you know, this is what advice I always try to give entrepreneurs, but it's sort of you have to be truly objective about what the risk of the status quo is.
Yeah. Because people it's easy to see how risky it is to make a change because there's unknown and people define risk as the unknown.
Whereas the status quo doesn't feel as risky because you're kind of doing it now it doesn't feel risky to just keep doing what you're doing.
But I recognize being objective that if we just kept doing what we were doing, that was extremely risky.
So it made the decision to move into brick and mortar very easy, even though it meant going into the board meeting and telling the board 450 trucks on the road and 30 million in revenue.
We're going to take that to zero.
We're selling the trucks.
We'll take revenue to zero.
But being able to have conviction and know that it's still the smart decision and that the brick and mortar had much bigger profitability potential, higher return on capital, like all the things that you would want plus for the customer and unlock multi restaurant ordering, better on time delivery.
The way I think about it is you have to have the mentality that you start off a startup and you're sort of digging for silver, but you got to be on the lookout for gold all the time.
And you might just see gold and when you see it, you got to go for it.
And it doesn't matter what egg on your face, it doesn't matter, money you lost, everything's a sunk cost.
It doesn't matter what you told the board, what you told the press, what you told employees, you have to go after the gold.
Yeah. Mark, why don't we go ahead and bring in our first caller?
Okay. Great. Hello.
Hello caller. Welcome to the Advice Line on how I built this.
You're on with Mark Lorre.
Please tell us your name, where you're calling from.
And just a little bit about your business.
Hey guy and Mark, my name is Ben Bailey.
I'm the founder of Chomp Chocolate in Salem, Oregon.
We are a cocoa bean to bar chocolate factory doing the whole process and we make vegan milk chocolate for everybody.
Amazing. Ben, thank you for calling Chomp Chocolate.
Okay. So you are a bean to bar chocolate and that means that you manufacture the chocolate bars, everything you do, everything yourself.
Yeah. I actually built the chocolate factory and didn't know what I was doing but figured it out piece by piece.
And we do the whole process from roasting the cocoa beans to packaging the bars in the factory.
And we do oat milk chocolate bars, peanut butter cups.
And then we just did a pivot to build your own chocolate bar, kind of like a build a bear workshop only for chocolate.
Wow. Okay. Cool. And you're in Salem, Oregon.
Yes. And tell me how you did this.
I mean, you have a chocolate factory.
There's machinery, it's expensive.
Most people who start chocolate brands, they outsource it and they just kind of sell the chocolate, right?
They'll have the recipe.
Tell me how you got into this.
Long story, but keeping it short, I'm an entrepreneur.
Mark, I sold basketball cards when I was 10 years old, went to all the card shows, sold candy to kids on the bus, took their lunch money.
Don't feel great about it, but learned some moral lessons, you know, mercenary versus missionary kind of stuff.
Started two e -commerce companies in New York City, very small exits.
Took a little bit of time to get away from New York City and back to Oregon, my hometown.
And growing up in a small conservative farming community, I saw that a lot of things have changed in the environment.
I came back to an orange sky because of the wildfires here on the west coast.
And I also had a little bit of a confrontation with factory farming of animals and it didn't really sit right with me.
And I love chocolate.
I have a sweet tooth, so I set out to create the best vegan milk chocolate replacement.
So it's not a compromise for people when they have the choice between our chocolate and a traditional milk chocolate.
It's an easy switch for them.
And, yeah, so kind of a big overreaction, but I had sold two e -commerce companies and put every single penny I had and then some into chomp.
I'm curious. So can you give us a sense of how much it costs to buy that factory?
So I put seven hundred thousand dollars in.
This is everything I had and that got us open.
So basically from a concrete box rectangle, I kind of sat on the floor the first day, documented it on Instagram and then learned everything from, you know, antimicrobial floors to shatterproof bulbs in the whole process, bought the equipment, a lot of ups and downs just to get open.
And then we opened September 21.
OK. And so now you make chocolate bars and you sell.
So first of all, you want to get to this other build a bear side to it.
But do you sell chocolate bars to consumers or in stores?
Yeah. So my wheelhouse is direct to consumer online.
So that's kind of why I took the plunge into building a factory.
And I knew I could kickstart the company with email marketing, paid advertising.
So about 70 percent of our business is currently direct to consumer.
And then about 30 percent is wholesale retail.
We're in about 400 grocery stores ish right now.
But yeah, we did four hundred thousand dollars the first year we opened and then seven hundred and fifty thousand last year.
And this year we're set to do a million dollars and 70 percent of that's coming from e -commerce.
So. Well, and so you and now tell me about this build a bear model here.
You can build your own chocolate bar.
Yeah. So back in March, cocoa bean prices just went through the roof.
Seventy percent of the world's chocolate comes from West Africa.
We actually don't buy from that region because of some ethnic issues.
But a lot of the bigger companies that usually buy in West Africa, they had crop failures, which drove the prices up.
So we had done something at the chocolate factory a year before where we invited the community to come through the factory and build their own chocolate bar.
There's nothing like it.
It's so much fun. You get to pick all your mixins, you get to name your bar, choose your wrapper.
And I thought, what if we could take that online and went on a deep dive through build a bear workshops business model and they do it online, too, and actually that performs very well.
And so now you can go on our website and we found a way to kind of like offset the margins we lost during the cocoa bean crisis until either, hey, maybe this is a permanent pivot we take or maybe we go back to the other stuff or maybe kind of a combination of both.
That's cool. I'm looking at your website now and I kind of want to do like a gummy Swedish fish chocolate bar.
It sounds really delicious, actually.
I think it'd be like a chewiness.
All right. And tell us what what's your question?
What question you brought for us today?
Yeah. So my question is, you know, this is definitely my mission era of my life with this company.
And my initial goal was to get this out into grocery and retail.
And that's proved to be a super crazy challenge, especially doing the whole process and not using the co -packer since we are, you know, doing doing every part of the production and fulfillment and marketing in -house.
So I'm wondering if I should, even if Coco prices, you know, come back down, if we should continue and lead with this build a bar model.
It's doing really well.
And so I'm wondering what the best option for us to do is.
All right. Let me bring in Mark Laurie.
Mark, you don't have to answer Ben's question just yet.
You may have questions of your own.
But please, let's bring you in.
Yeah, sure. Sure. I do have a couple of questions.
Nice to meet you, Ben.
Very cool what you've built.
I'll have to try it out.
Who is your primary competition in sort of the vegan chocolate bars?
How do your costs compare?
Yeah, our primary competition, I'd actually say now is mainstream chocolate because like some of the bigger companies launched plant based versions of their chocolate.
We is unreal. A competitor, I would say unreal is they're not strictly vegan, though.
So we're like I think we're one of the primary only vegan companies, which I'm not sure how much, you know, of a difference that makes to people.
What we've noticed, like with distribution is taking a chance on a smaller company.
Even if our quality, in my opinion, and our taste is better and we have more of a special process, they're still only going to carry the big companies that put out that version.
Like Hershey's, even Hershey's does an oat milk version.
They do. Yeah, they put out like a little bit after we launched, our peanut butter cups are the best seller for us and they launched plant based Reese's too.
We've also had to say no to like a lot of big stores, like over two thousand stores in the last year, because, you know, I can't I have the factory and the production equipment and technically we could produce more chocolate, but funding another crew and then the purchase orders that are 30 to 30 to
90 is just really difficult.
And we're doing our own fulfillment, too.
And it's been I've raised a little bit of money, friends and family.
But I feel like Build -A -Bar might be a way to to have this higher margin model that funds the backside of the business and we can kind of take control of our own destiny being primarily an e -commerce business.
Yeah, I personally been just hearing your whole story.
I mean, it's going to be difficult, I think, to compete on a commodity basis, doing it yourself.
It's going to require a lot of capital.
I know I'm pretty close with some of the big manufacturers and they've invested hundreds of millions, if not billions of dollars in plant and equipment to get the cost down.
And I'm not sure just the sort of the higher quality on a commodity basis that people are going to pay that much extra to get vegan chocolate.
I think the way you're set up, though, you can do what no one else can do.
There's no way a big company can do the sort of Build -A -Bar type approach and chocolate.
And so you could really own that market and you have the ability to be so much more flexible and your system's built for flexibility.
And that flexibility will give you margin pricing power, right?
And people will pay for it.
It's a gift. I think the market for Build -A -Bar chocolate is still massive if you owned it.
So if I were you, I would push that hard and see how big you can get it.
And then you could always move into other areas if you start to tap out.
But I think you've got a long runway there personally.
Essentially customization.
And we should mention, when you build a bar, you get a customized label, you can put your name on it and do all that stuff.
Incredible, incredible gifts for a lot of business to business opportunities, too.
We've seen, and Mark, I think you're right, like competing with this commodity level, and I think I know guys talked about this, too, is you kind of find out what consumers care about or at least what they're willing to pay for.
And unfortunately, some of these mission -based things, and I don't blame the consumer, but they don't really matter as much as you initially think they do.
So I think Build -A -Bar is kind of my way to almost kind of go into the back door and build a brand that's really fun, maybe even open physical locations where you get to go build a chocolate bar and go to like, yeah, yeah, and like, yeah, these really fun experiences with your family and maybe there's
other experiences you have when you walk into a chompville, you know, and yeah, I mean, wedding favors, showers thing, I mean, it's like, yeah, you could think of a customization in chocolate and possibilities there.
Um, I guess, um, what, what I think is, is interesting is I think you're right, Ben, that, that consumers don't really care so much about, you know, you know, where you're sourcing it from and the mission.
And unfortunately, you know, they're not going to care if you're buying ethical chocolate, some people will, but most people don't.
But I do think what they would care about is the fact that you're doing everything.
You're, you're buying these virgin beans, you're roasting them.
Um, you know, you control the process, you're grinding them, you're, you're using, you know, your ingredients.
I think you should push that a little bit more, especially on your website.
I mean, I think that knowing that level of quality does matter to a consumer.
They might not care so much about the ethics right now.
I don't, you know, some people do, but I do think that quality people do care about that they know that that's what differentiates you aside from the fact that it's customizable, that you really are doing everything in this process to bring consumers the best tasting chocolate bar.
That that's something that I think it'd be interesting.
Yeah, I agree there.
I agree with you, Guy.
I also think being able to make a case that you're sourcing literally the highest quality beans in the world.
Um, and, and maybe even different grades.
I mean, maybe even educating people the way they do with, with wine, you know, like where are these, these grapes are from this very specific region of Oakville in Napa at this, you know, elevation and like almost a terroir of like the cocoa beans and literally charge some, some crazy price because of the exclusivity
of it and make it almost like a beautiful box, a beautiful, you know, almost like instead of giving a thousand dollar bottle of wine or really high end cigars, you're giving this like really high end multi -hundred dollar pieces of chocolate and tell a story around that.
I think there's something potentially there.
And, and again, you're uniquely positioned to do it.
Yeah, I know. I think those are great ideas and I've always kind of thought about how my farming background ties into it as well.
So I think, you know, um, chocolate is a lot like wine and it has terroir and it has a story too, and a lot of the beans we're buying are from, um, small farmers as well, um, cause we're not buying these big commodity beans.
So I think those are amazing ideas.
I think, um, there's a lot of untapped territory there.
So yeah, thanks, Mark.
You're gonna have to, you're gonna have to call Mark and ask him to tap, tap you into all of his rich friends and then you can sell those bars.
Sounds good. Ben Bailey, Chomp Chocolate.
Congrats, man. Good luck.
Thank you, guys. Thank you, Mark.
I've been listening since the beginning and thanks for getting me through two other businesses and hopefully, uh, number three.
Thank you so much for listening.
We're going to take a quick break, but we'll be right back with another caller and another round of advice.
Stay with us. I'm Guy Roz and you're listening to the Advice Line right here on how I built this.
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Welcome back to the Advice Line on how I built this lab.
I'm Guy Roz and my guest today is Mark Lori.
He's the founder of diapers .com, jet .com and wonder what do you say?
Mark? Should we take another call?
Caller. Hello. Welcome to the Advice Line.
Please tell us your name, where you're calling from and a little bit about your business.
Hi, I'm Lindsay Shores.
I'm calling from Salt Lake City, Utah.
I'm the founder of Baby A Go Go, a company that provides and creates innovative baby products to make parent life easier on the go.
Cool. All right. Well, welcome to the show, Lindsay.
Baby A Go Go. Tell me what your products, products or products are.
What do you sell? Yeah, we currently have two products.
We have a diaper kit that fits in your back pocket.
It's a vacuum sealed, compact diaper kit has one diaper, five wipes.
And after usage, you wrap it back up, seal it up with a sticker provided on your wipes and it becomes an odor free sustainable back.
So easy way to stash in your purse or if you're in a public bathroom, a way to seal it up and make it a lot less gross.
And then our other product is a magic wipe.
It's a small disc that fits in your hand.
It's an on the go wet wipe.
And once you puncture the middle, it slowly grows into a full size wet wipe.
So that's very useful for parents on the go and all consumers on the go.
So if you're familiar with, do you remember those wash cloths that you throw in like a tub of water and it expands?
Similar to that, but it's a little more magical because it's very unexpected.
Wow. Okay. So these are like, uh, travel diapers and it's a one -off, right?
Cause I remember, my kids are now teenagers, but we would, uh, always pack a, I can't remember what they were, that there was different brands who would pack the diapers in there, one or a few, few of them.
And then the, there were that's a thin wet wipe.
We'd put that in there and right.
But there's not, there, this is just everything in one simple package.
There's one diaper, some wipes.
So it's designed really for like, I guess if you're at the airport and your, your baby's just like pooped all over the place and you gotta go to the bathroom.
Exactly. Yeah. Yeah.
Yeah. Do you like talking about this subject?
I know I love it. Yeah, it's definitely, I know Mark's a big lover of diapers and the disasters and messes.
Um, number one and number two.
Yes. Um, I have to know how you can, I mean, I have to know you came up with the idea because it's a great idea.
And so much of, so much of how I built this is those moments where people like, we, we have a, uh, an episode about, uh, Larry and Lenny's protein cookies.
And they're really, these guys are bodybuilders.
And one day they were like, I'm sick of chick chicken and, and egg whites.
Like, can we put the chicken and egg whites in a cookie?
That's how it started, you know, now.
And then they got to a hundred million dollar business.
How did you, uh, how'd you come up with this?
Yeah. So I was traveling a few years back with my family at the time.
My youngest was one year old.
And we went to a family resort, a beautiful, very family friendly place.
I always packed diapers for two to three days and then get to the destination.
Go stock up. No, no brainer.
That's always how it works.
So going to this destination, I thought, of course, I'm going to find diapers.
Um, I was running out on day three of our day eight trip and I searched and searched and searched the stores and nobody had anything accessible for babies or infants, food, diapers, wipes, all the stuff.
So my next best option was to take a half a day and go into town, take an Uber, pay the cost of that, leave my family.
It was like, this is crazy.
Then it hit me that there's multiple moments at malls.
You're at the zoo, you're at the aquarium, you're at Disneyland.
You're in all these places that you need these diaper kits that are not convenient.
So I jokingly told my husband the end of that week of our trip that like, I can't believe this is such a huge void in the market.
I'm going to start a business tomorrow.
And fix this. And I did.
That's awesome. And, and really can you give us a sense of how you guys are doing right now?
What, what, I mean, have you, have you broken a hundred thousand dollars in sales yet?
No, not necessarily, but we are definitely in the small startup phase.
Very excited though.
I love the advice you guys have given.
Yeah. This is such a great idea.
Where are you selling these right now?
I'm selling these online.
And then we just recently onboarded with areas, which is one of the largest travel and hospitality companies, um, globally.
So we have, we're now in their airport stores as well as a bunch of their return to pikes.
How many of their airport stores?
Uh, six. In, in which airports?
In Atlanta, which is the number one airport.
So it's exciting. Yeah.
What's your question for us today?
My question is, there's always a really positive response when I'm speaking to retailers and buyers about these products, they're really excited about them.
They immediately understand the need for them.
Um, but because they are new products and a new space, there's not much to compare it to.
So my question is how to take the risk and build it more credibility in an untested product market and, um, get within the door without offering a discount or a testing phase that might not necessarily be the hook they need and could be a big loss for our company.
Okay. Mark, Lori, I think, you know, a few things about diapers and retail as well.
But, um, is, is the margin structure.
In such a place that you feel good about like the retail selling price.
Well, what is the retail price?
Yes. The retail selling price is 5 .25.
It's a good price. 5 .25.
Yeah. Can you, can you do it for 4 .99?
Um, it was 4 .99 actually about a year ago and because of, um, inflation it's 5 .25.
But depending on who retailers we're talking to, yeah, the 4 .99 is still a possibility.
Okay. And you make good margin at that.
Yes. It feels good.
I mean, have you made it, have you offered it as returnable?
I mean, that's always, uh, protection for the retailer.
Yes. Um, that's not something necessarily highlighted.
So that's a great idea.
Yeah. I mean, that's, that's the easiest is like put it on the shelf, make it returnable.
And like, it's not the kind of thing that you know, spoils, right?
You, you, so, so they returned it to you just sell it somewhere else.
In fact, I mean, I would even probably start on consignment to get some sales history.
Um, but if you're, if you're really strapped on cash and there's no possible way to do that, the next best thing is to say, um, yeah, make it a hundred percent returnable.
Um, no period of time to return it, it doesn't sell, we'll take it back.
Tell the retailer you will stock all the shelves, make sure, you know, you've got kind of one shot to make a first impression.
So make sure you have good shelf space it's on the counter.
We're the right at, you know, customer eye level.
And, uh, uh, and have a little maybe point of purchase kind of display unit that looks really cool and literally have that box of, of, of 20 or have wherever you put in there and have it right there on the counter.
Okay. Awesome idea.
Yeah. I mean, I just feel like this is a no brainer.
No brainer, no brainer.
I mean, I mean, we, it's such a great idea response I'm getting all the time.
The only thing I worry about is it does sound a little bit expensive.
Like if you're saying that the demand is there, then it's a home run.
But I would think that at, at massive scale, if you're doing, you know, uh, millions of these that they would, you'd be able to get the cost.
I mean, sort of the retail selling price down even below 499.
We can do that. It's, um, I mean, just speaking to and testing out, speaking to a lot of retailers and buyers, that's often the response is, Oh, we want to do these for 499 and now five 25 and you know, depending on what airport you're in, some have suggested seven 50 and a lot of people I talked to
during, you know, testing period and phase, it's like you guys are dads, you know, it's at the point that you need it.
You're going to pay whatever.
Say you don't care the cost.
It doesn't matter. Yeah.
There's definitely the market for, Hey, I'll pay whatever because this is a necessity right this second.
And then there's also the price point where it's like, Hey, I'll, I'll take a few of these.
You never know. I might need them, you know, but it's hard.
It's hard to like, say, you know, I'll take, you know, three or four of these and suddenly it's 20 bucks, you could buy a whole box of diapers for that.
So I'm just trying to think about how to make the market size much bigger.
It's really what you can do at scale.
I'm always thinking about scale and working backwards.
And I would say, you know, at sort of 10 million units, what's your cost of the, of the display and the packaging, you know, and then figure out what the retail price would be off the back of that.
And obviously your cost today is a lot higher, but I would sort of grow into it.
I would basically take no margin in the beginning, you know, and, and, uh, get the right price point, create much bigger market size, and then eventually get the scale you need.
So, so the combination, I would do the airport thing and the sort of emergency charge, we need to charge, make a good margin on it, but simultaneously be working on the much bigger opportunity, um, uh, of a, of a scaled version of it.
Okay. Love that. Um, definitely consider that we started at the DDC idea of subscription model, but to Mark's point, it was just too pricey to stock up.
I had, you know, we have customers that do it.
It's not the everyday customer.
And so, um, yeah, definitely excited to roll out into airports and start getting more CDs of vending machines in the bathrooms.
Yeah, vending machines.
That's smart too. Yeah.
Super cool idea. Lindsey Shores, baby, go, go.
Yes, definitely. Um, congrats.
Thanks so much for calling in.
Thanks you guys. I'm the biggest, biggest fan of the show.
So, so happy to be here.
So great to meet you both.
Thank you. Good luck, Lindsey.
Thank you. Um, I like that idea that you're saying about putting it next to the register.
Like you've got your five hour energy, your slim gyms, your pickles, and then the diaper.
Yeah. Right next to that, you know?
I think there's probably the actual cost though at 10 million.
She, she, she hasn't gotten that yet, but I mean, it's going to be a fraction of what she's getting now.
And I just think that, that could be a big market.
Like if you get that price point down, you could just imagine every parent having a few of those in their purse pocket, whatever, right?
Like, you know, where it's just kind of part of, you know, part of your diaper spend, right?
I mean, how often I, I find myself buying like shaving cream or deodorant at the airport all the time, I always buy snacks because I don't eat what they're serving on the plane.
So I'm like looking for nuts.
And you pay like $13.
Yeah. I like for the pistachios, I pay like 15 bucks.
And I'm like, all right, so it's available.
We're going to take a quick break, but when we come back, another caller, another question and another round of advice.
I'm Guy Ross. Stick around.
You're listening to the Advice Line on how I built this lab.
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Welcome back to the Advice Line on how I built this lab.
I'm Guy Roz. And today I'm taking calls with Mark Lorrie.
So Mark, let's, let's bring on our next caller.
Hello, welcome to the Advice Line.
You are on with Mark Lorrie.
Please tell us your name, where you're calling from and a little bit about your business.
Hi, Guy. Hi, Mark. Thank you for having me.
Nice to chat with you guys.
My name is Ryan Thompson.
I am from Vail, Colorado.
In 2014, I started 10th Mountain Whiskey and Spear Company.
We are a philanthropic award -winning craft distillery named in honor of the historic 10th Mountain Army Division.
Thanks for calling in 10th Mountain Whiskey.
10th Mountain, I believe is, is no longer in Colorado.
I think they're in, they're in Fort Drum, New York.
They're on the border with Canada today.
You're exactly right, Guy.
I'm impressed with your military knowledge.
I covered, many years ago, I covered, I was a reporter.
I covered the Pentagon.
So that's the only reason I know that.
But cool, so cool, cool name.
And, and you tell me how you got into this business.
Yeah. When I first moved to town in the late nineties, I bartended around town under the ski bum lifestyle, skiing, the 80, 90, 100 days a year and bartending at night in 2002, I started a restaurant that I still have my thumb on today with my two original business partners, 23 years later.
About 12, 13 years ago, I was watching what the craft distillery movement was doing.
I homebrewed just for fun for friends and family.
And, was watching what a couple of competitors and other ski resorts were doing.
And I thought someone in this town was going to make whiskey sooner or later and just thought might as well be me, right?
So you guys bought a still and you bought all the things that you need to.
Yeah, that's correct, Guy, you got it.
We distill, we mature, we bottle all in -house.
We have a tasting room at the distillery where we hold events, do tours and hold tasting classes, and we have a offsite tasting room, which is at the base of Vail Ski Resort in Vail Village as well.
All right, cool. I'm curious, right, because there's a lot, and I'm in Northern California, where the wine industry is, going through some challenging headwinds right now, right?
Because there's all, every day, it seems like there's another article about alcohol and being bad for you.
And, you know, I know that younger people aren't drinking as much as, you know, people, my generation and older.
Are you seeing any headwinds at all right now?
Yeah, certainly, you nailed it, Guy.
There's, almost every day an article comes out in regards to alternative opportunities to relax and enjoy...
Cannabis or... No and low -ock movements, the high and drive movement, if you will.
And so that is part of my question.
So we're at a pivotal point within the business.
We're just celebrating our 10 -year anniversary.
We're doing well. Thank you.
We're doing well here in the state of Colorado.
We self -distribute in the Vail Valley.
We have a large distributor that distributes outside of our area, but within the state, and so about 80 % of our sales comes from within the state of Colorado.
About 20 % are in a number of other states and distributors.
However, 80 % of my headaches come from that as well.
So a little bit about the 80 -20 rule, right?
And so I own 100 % of the company I've gotten this far without having to sell equity.
I have an SBA loan, bagged, barred and scraped as much money as I could put together over the last 10 years.
However, I'm to a point where if we continue to grow, do I look to sell off some equity and bring on some investors?
Or given the structural market shifts within the industry, do you think it'd be smarter to maybe pull back some of our distribution and some of these outlying states and just focus more locally and then our direct consumer models as well?
A lot to think about here because, Mark, obviously, I know you know a little bit about this market, too.
And it's complicated.
Every state has different regulations.
So the question, I guess, is should he double?
It was a couple questions.
Should he bring on equity partners, but also should he double down?
On where they're doing the best or really try to push push into the into expanding into some of these markets that are also proving to be a bit of a headache?
Yeah, I have a couple questions.
First, first, nice to meet you, Ryan.
Great, great story as well.
What percentage of the market are you in your current state?
And Colorado, a percentage of the overall market, I'd say we're about 10%.
So there's certainly some room for growth there.
10 % of the whiskey market in Colorado?
Yep. Okay, then what what is it about your product that is special relative to other whiskeys?
Certainly where our distillery is we're at 6 ,300 feet in altitude.
So it's an ambient dry air climate with some diurnal temperature fluctuations, which adds some different flavors to our products, certainly matures our whiskey a little bit quicker than others other areas.
Our Angel Share is mostly water that evaporates.
And so we're able to get some higher proof whiskeys and do some special single barrel barrel picks.
And so we're well known for our whiskeys.
We make a bourbon, a rye and a single malt.
We make four other additional spirits as well.
And then certainly the amount of respect and support we give back to the military, both active and veteran soldiers alike.
One last question. In terms of your goals, like would you be happy doubling the size of your business over the next few years?
Are you really saying no, I really want to go for 10X or 100X or no, you know, the next few years, if I could double the size of the business to keep 100 % I'd be really happy with that.
So originally 10 -12 years ago when we were starting we wanted to be a national brand.
And that was the original goal.
Given the industry market shifts, I'm thinking it might be smart, might be smarter to pull back and just be a regional brand.
However, I still have inside me that I want to grow this.
I love the challenge of it.
It's a tough industry.
It's an exciting industry.
I love all aspects of it.
And so in one hand, it's do we lose the battle to win the war and pull back?
Or on the other hand, if you're not growing, you're dying, right?
So it's a little bit of both that I'm having to struggle with here.
Are you growing? Are you on a path to grow this year?
Yeah, Guy, we have been growing about 10 % year over year.
This year, we're going to be about we're going to be flat, which in the industry from what I've been told is a win.
Yeah. So if you're 10 % share in Colorado and 10 % growth, that means you'd be going from 10 % to 11 % share if you just focused in Colorado or 12 share is 20%.
It feels like just from the outside looking in, given all the things that you've said where you have a competitive advantage, I would double down on that competitive advantage that you have in the state of Colorado.
It's working. The brand resonates with that audience.
You've got physical brick and mortar people are feeling and touching your brand.
And if you only have 10 share, I mean, you can go to 20 share.
That's why I was asking 20 share and double the size of your business.
That's some pretty good growth over the next few years.
If you were able to double your penetration.
I think the level of focus is not to be underestimated.
Like you said, there's a lot of complexity in going into other states.
You don't have the same marketing power that you do in Colorado, and it takes a lot of time.
And so I think there's a benefit of focusing and saying, hey, we're going to double share in Colorado, and this is how we're going to do it and get everyone thinking on the same lines.
And then after you start getting that real traction there, maybe you pick a second state that's closest in that you think would most likely be a state to resonate.
But I wouldn't, it doesn't feel right to me on the outside thinking about taking the brand national without the same marketing budget or bang or that some of the bigger players would have.
Right. Mark, exactly.
I appreciate that insight and your opinion there.
And that's exactly what keeps me up at night is trying to figure that out.
And so certainly respect your career and I love your insight to that.
So I really appreciate that.
Yeah, the challenge is in the next state over is Utah.
And I don't know how great of a market that is.
Yeah, I think we probably look to go north to Wyoming or south to New Mexico first.
Right now I may have missed this, but did you mention your annual sales right now?
We're a little bit north of 2 .5 million.
So one question I have for you is what do you, what's sort of the end game for?
I mean, Vale is a really important, you know, if you're talking about building a brand, Vale is a great, especially a whiskey brand, a great place to do that because it attracts obviously skiers from around the world.
It's you know, it's one of the probably the five greatest ski areas in North America.
I mean, is there a world where you want to you would one day want this brand to be acquired by a Diageo or a bigger, you know, a bigger multinational?
Right, Guy, it's I certainly love what I'm doing.
I love growing it. I love the challenge.
I could see me doing it for a number of more years.
But I get asked this question often and everything's got its price.
I think certainly I will see if there's a price I can't or an offer I can't pass up.
Then it might be something I'd entertain.
If you are thinking about if you're thinking about selling it, then it'll be more valuable to have deeper penetration in a regional market than a shallow penetration in a national market.
Okay, so that's something to consider as well.
Got it. Thanks, Mark.
I think that's great advice, Mark.
The brand is called 10th Mountain Whiskey and Spirits Ryan Thompson.
Thanks so much for calling in.
Guy, Mark, I appreciate your time.
Thank you very much.
Thank you, Ryan. Good luck.
Good luck, man. Yeah, it's I mean, we've we've had a couple of Spirits brands on the show that have been acquired and some that haven't.
But I think that's exactly that's just an important point, Mark, which is better to have to really be a known quantity in a region, right, than to kind of just be.
Yeah, to be something special, like, you know, really stand out.
And I think you start going into the 20 share plus and start, you know, you're starting to become a meaningful brand in that region.
That's where I would focus.
I think also, he said before, like how 80 % of his time is outside of the existing region.
So just switching focus is going to help build that brand.
And he's got a much better chance, I think, of doubling in in Colorado than he is, you know, trying to do it nationally.
Mark, before I let you go, want to ask you about, you know, here you are, you're still a young guy, you're only in your 50s, and you've to accomplish all these things.
And you've got a whole new business now that you're that, you know, we're going to be hearing about for the next, you know, 20, 30, 40 years.
If you could go back to when you started diapers .com and even before with what you were working on.
And you could give yourself advice and say, hey, you know, you need to know this, I'm coming to you from the future.
What do you think you would have said to that guy?
Oh, there's so many lessons.
If you're asking for like, what's the number one lesson?
Sure. Yeah. I think I have to if I could only pick one, I think people I think I think I would I've learned so much about the type of individuals that can really help propel a company.
And at the end of the day, like you win or lose, it's it's down execution and it's people.
And how do you find the people that are going to be most successful in an early stage startup?
I want somebody that showed a demonstrable level of success in everything they've done in their career.
You know, they don't have to go to the best school.
But in the workforce, they've shown a demonstrable level of success.
They're in a company, they've been promoted.
And when they move from one company to another, it's a big step change.
They make an impact.
Yeah. Stars make an impact.
And when they move, it's noticeable.
Like, you know, and and those people, the ones that I mean, 20 percent of your folks do 80 percent of the work.
And if you can get those top 20 percenters, even top 5 percent if you're lucky enough to get that that could make the company and every company that I've had, there's always a few people that are top 5 percent.
And those are the people that really drove and made the company what it is.
So I would just I didn't really know that back then and just hired people.
And just you know, I just I was like, thought I can interview somebody and find out if they're good and you just can't.
It comes down a resume.
You have a history.
You've been in the workforce.
What have you done?
That's actually really great advice.
It's because you've got to surround yourself.
Great entrepreneurs are not great entrepreneurs, great people who surround them.
That's really I think the greatest entrepreneurs are often the greatest talent spotters.
But it's it but you're right.
It's hard because you can you can talk to somebody really like them and it just doesn't work out.
You should get I call it honey pot.
You know, you sort of it's like, oh, I can get a beer with this person.
They took a game and in an hour you're like, oh, I really connected.
I like this person.
But then they don't they're not able to like really push the ball forward, you know, and there's only a small percentage of the population that can truly invent, create and make stuff happen.
And there's a certain resume that that it shines through.
And now I can spot those.
And so I would teach myself how to how to spot that if I went back in time.
Yeah, that's great advice.
Mark Lorre, founder of diapers .com, Jekk .com and Wonder.
Thanks so much for coming back on to the show.
Thank you, Guy. It's great having you.
And by the way, if you haven't heard Mark's original Hi, I built this episode, you've got to go back and check it out.
You can find it in the podcast description.
Just click the link there.
And here is one of my favorite moments from that interview.
I'm happiest when I'm doing something entrepreneurial building something I mean, it could be inside of a big company building something.
It's really about the autonomy to just sort of like just run and build build fast and not have to get, you know, traditional corporate buy in before doing everything because, you know, corporations, they just tend to shy away from risk and low probability outcomes.
And I gravitate more toward low probability outcome, but but massive upside.
And I think that's where the opportunity lies for an entrepreneur.
Thanks so much for listening to the show this week.
Please make sure to check out my newsletter.
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And we'll put all this in the podcast description as well.
This episode was produced by Kerry Thompson with music composed by Ramtina Ablui.
It was edited by John Isabella.
Our audio engineer was Sina Lefredo.
Our production staff also includes Alex Chung, Chris Messini, Carla Estevez, Elaine Coates, J .C.
Howard, Katherine Seifer, Devin Schwartz, Neva Grant and Sam Paulson.
I'm Guy Raz. And you've been listening to the Advice Line on How I Built This Lab.
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