Transcript – #160 Kevita & Flying Embers: Building Functional Beverage Companies from Kevita’s $200M+ Acquisition to Flying Embers Big Bet on Fermented Alcoholic Drinks | Bill Moses, Founder & CEO

Please enjoy this transcript of my conversation with Bill Moses, Founder & CEO of Kevita and Flying Embers.
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April 25, 2023
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Please enjoy this transcript of my conversation with Bill Moses, Founder & CEO of Kevita and Flying Embers. Transcripts for other episodes can be found here


Transcript – #160 Kevita & Flying Embers: Building Functional Beverage Companies from Kevita’s $200M+ Acquisition to Flying Embers Big Bet on Fermented Alcoholic Drinks | Bill Moses, Founder & CEO

Daniel Scrivner (00:00):

Phil Moses, thank you so much for coming on. I'm really excited to have you on Outlier Founders. Thanks for making time.

Bill Moses (00:04):

Thanks for being here, Daniel. Appreciate it.

Daniel Scrivner (00:06):

So, we're going to cover a lot of ground today. We're going to talk about KeVita, which is a company that you founded, ended up selling to PepsiCo in 2016. We're going to talk about a bunch of investing and advising you've done in really interesting brands like Iconic Protein, Wild Brands, Koya, Vive, a bunch of interesting companies. And then we're going to talk about the company that you're building today, which is Flying Embers, which is all around this fermented beverage better for you concept, which is really interesting.

(00:31):

And so, where I wanted to start is if you could just give people a quick sketch of your background and a little bit of the journey that you've had.

Bill Moses (00:38):

Sure. Let just see how far we want to go back. Oh, I think we'll start with school at UVA, a little bit overseas adventure at the south of France at the American University, where I learned about fermentation and wine making. And then fast-forward to New York City, Wall Street, 10, 12 years, Bear Stearns to partnership on the Street, which still exists. Went ahead and moved to California. Several different business deals I was doing. I got into investment banking and merchant banking, and ended up investing in a company in China, that George Soros was a finance financed, and that was a technology company back in '89 and '90, believe it or not, when I was over there in my 20s and had an exit there, and got into wine making and learning about fermentation, at my property in Ojai, California.

(01:39):

Went ahead and again, some other business deals and transactions. Nothing really worth mentioning, necessarily. I did, although, I did start a cable television network that was actually called the Recovery Network or RNet Health. Ended up getting Liberty Media and TCI, ended up selling at the Liberty Media and that was interesting run. Then all of a sudden I was into food and beverages. I was really wanting to live off the earth. I was cultivating my property in Ojai, planning, making it a permaculture, it was certified organic. I planted all sorts of grapes and fruit trees and all that. And I was in love with California, coming from New York City.

(02:19):

So anyway, I started the first certified organic winery in the central and southern California coast, and really learned that you could really make wine organically without compromise of flavor or quality. And was fortunate enough to win some gold medals at some open competitions, San Francisco International and Chronical Wine competitions.

(02:44):

And that really got me into fermentation. I was like, "Well, I really love to watch this alchemy, this magic, this special process that really transcended anything that was part of the ordinary realm of life, this whole thing of fermentation." So, I fell in love with it. And anyway, actually my wife's friend, best friend, developed a drink called Kevita water kefir. And we partnered up and I got behind her. We raised money, we built manufacturing, we refined the product. And then it was the antithesis of kombucha, because we were a water kefir, which is a different ferment. It's a lacto ferment that's much softer. Anyway, but all of a sudden I was like, "Hey, you know what, let's go ahead and develop a hard kombucha." So, with some other guys I brought in, Nate Patina and John Ballast. They went ahead and developed this amazing kombucha product that complimented Chakra's water kefir.

(03:53):

And next thing, an investment banker came to me and said, "PepsiCo's really looking for better for you." And we got PepsiCo to invest. And anyway, there's a story there about how to actually get a strategic on the cap table. It's not easy, I'll save that. But then fast-forward from there, I went ahead and sold KeVita to PepsiCo. Used that cred and some cash to go ahead and identify great entrepreneurs, great opportunities, great on trend products, invested in a bunch of those, still sit on the board of several of those, some of those have transacted and exited.

(04:30):

And during that time or shortly thereafter, I was like, "I really want to do it again."

(04:35):

And a lot of my advisors and friends were like, "Look, building a brand and doing it once is enough, don't need to do it again." And I just wanted to get in the mix. And that's when I started Fermented Sciences, which is a platform for better for you alcohol, adult beverages. And out of that, we launched Flying Embers, initially, as a hard kombucha company, hard kombucha product offering. We immediately jumped into, at the time, the hot trend of a hard seltzer. And then most recently we've gotten into fermented can cocktails, a margarita and a mojito. So, that's really the abbreviated bio.

Daniel Scrivner (05:16):

I mean that's prolific. You covered an enormous amount of, I think, fascinating interesting ground there. One of the things, I guess, I had two follow up questions. One was, brought up obviously, learning, and I guess, spending more time with fermentation on this winery that you have in Ojai. And is there a name for the winery that people can find and buy the wine under?

Bill Moses (05:36):

It's called Casa Baranca, and that means The Ravine.

Daniel Scrivner (05:41):

We will link to that. But one of the things you hinted at, just really briefly, is that you studied in France, and it sounds like some of that was fermentation. Obviously, since fermentation's going to come around full circle, we're going to spend quite a bit of time on this, talking about Flying Embers, I think it'd be interesting to talk about that. Give us just a little bit more information about how you learned about fermentation back in France, and maybe how that influenced.

Bill Moses (06:02):

So, I was at the American University, and ultimately my learning came from the garage, I was living with the French family in Aix-en-Provence, outside the city, and they were garage winemakers. And I would, on the weekends, participate, watch them make it, we would drink wine every day, we'd have wine. And I just really fell in love with the process and, and I was obviously in the great French regions and traveled throughout France and Spain and Italy. And at that point, I knew that at some point in my life, I was going to get back into that, but I didn't have any idea that it would be where I ended up today.

Daniel Scrivner (06:50):

How hard is it, and this may be a difficult question for you to answer, but when I hear garage wine in France, I think both, "Wow, that sounds amazing." And, "Oh, that's probably could be terrible." I have friends that have tried to make beer and wine, and it's a very trying process. How difficult was it to make great fermented wine in a garage, like in France?

Bill Moses (07:07):

Well, it's really interesting. The garage winemaker is a term in France, and they're really the rebels against the established viticultural regions in society, but they're great wines. Some of them are really great wines. So, I learned the handcraft, small boutique method, that I think you couldn't learn at UC Davis, learning oenology, or you couldn't learn working for a large vineyard or winery. So actually, I think, it was really the most beneficial life experience I had, period.

Daniel Scrivner (07:50):

It's fascinating. Okay, I want to start today again, we're going to cover a bunch of ground and so I'm going to try to move through a lot, because you've got a fascinating background, I want to try to tie it all together. But I want to start with KeVita, and you talked about at the beginning, it sounds like your wife's friend had developed this water kefir and that the fermentation was very different from kombucha. And I want to weave all of this together. And so, maybe the question I wanted to ask is, take people listening back to 2009, what existed was kombucha, had it taken off, had it reached mainstream? And then what was so different about KeVita compared to something like kombucha?

Bill Moses (08:25):

So, in 2009 there was a man, G.T. Dave, who I know and respect hugely, immensely. He's amazing, amazing entrepreneur. And he was the dominant kombucha player, not hard kombucha, excuse me. We saw that with kombucha, when we were drinking it as new to the category, and that would be me and my early co-founders. We thought it was harsh and tarred, and it got a little rank, and it was very live and wild, and we just thought, "Wow, there's got to be a way of doing this better."

(09:01):

So, like I said, Chakra developed a water kefir, which we positioned as the antithesis of kombucha, but yet a probiotic, prebiotic, live fermented drink, that can really help people and benefit people. And so, we went out, and marketed that, and we got placements next to them, and we carved out our niche, but ultimately, the category was really kombucha, and as much as we thought differentiating it and sitting next to it was the playbook, learning and knowing and seeing that is what gave me the impetus to, I wouldn't say pivot, but quickly realized that we should do another line extension, and we did, and was a kombucha, that actually complimented our water kefir. And that was a really interesting moment, where dogmatism and intransigence of what you believe is right, and whatnot, needs to sometimes alter, based on looking at category development and how you fit within that category, or not.

Daniel Scrivner (10:14):

I think that's one of the most difficult aspects of being an entrepreneur, is you clearly are building something that you believe needs to exist, should exist, and yet, you also have to balance that with extreme humility and openness and mental flexibility to listen, and take in the data that says you're wrong and to be able to pivot, in that example.

(10:33):

I want to ask a question, and maybe just to parrot this back. So, it sounds like your experience of drinking kombucha for the very first time, reminds me of my experience. I remember being in San Francisco, I had never heard of kombucha before, and I think I got it in a Whole Foods store. And I remember going home and trying it, and just being literally, "What is this? And it was a GT kombucha, which I drink today, but I remember it's got this live kombucha culture on the bottom. It's a very, very, very different drink. So to me, it makes a lot of sense to come in and say, "It's got to be something that's different."

(11:05):

The question I wanted to ask is, so you take this water kefir, you go to compete with GT, you realize, "Okay, people really want kombucha." How does that influence KeVita's kombucha product?

Bill Moses (11:16):

So, what we wanted to do was take more of a scientific approach, and at that time, we had gotten Pepsi invested, and of course with Pepsi on the board, and really, I was working with their teams, what they wanted to see was a product that had a standardized nutritional fact panel. It wasn't something that was moving around, because it was live and fermented. And so, really thinking through a scalable, how do we take a raw, organic, naturally fermented product, water kefir and kombucha, and make it into something that could be manufactured and commercialized with reliability and consistency around quality assurance, so that we were compliant and not being considered an alcoholic product. So, that was really where we rolled up our sleeves and began to ideate around a product that first, like I said, flavor first, really met the expectations of a kombucha drinker. It had a high TA, a lot of organic acid, but yet didn't have some of the other aspects or attributes of it that would normally turn off a mainstream consumer, like the floaties in it, that's called a pellicle.

(12:32):

Pellicle was really the off product of the bacteria and yeast, anyway, I won't get into details. So, we decided we don't need that, and then we decided that we really want to make it so that it's more shelf stable. The kombucha was actually shelf stable, the water kefir wasn't, we could be shelf stable, and that was really important. So anyway, long story short, we wanted to match the expectation of the existing kombucha drinker, yet make it more mainstream, where there wasn't anything that could be polarizing, so that we could extend the category beyond the early adopters that were drinking GT, because trying to pull any GT drinker away, he had a halo, you talk about a badge, you talk about all those great marketing, he had that. So, we wanted to leverage the reputation of kombucha in a way of expanding the category, and we did. And we ended up making something unique and different that complemented the existing folks on shelf. And that became a much bigger product line, than either, the water kefir, or the apple cider vinegar, which were the other two lines.

Daniel Scrivner (13:39):

That makes sense. And I want to ask a question and come back to PepsiCo in a second, and talk about how you got them on as an investor, and talk a little bit about the process of then selling to them. But I want to ask a different question, which is, so just hearing you talk there, it sounds like, I won't regurgitate what we said before, but you start with water kefir, you see that it's a kombucha category, you need to make a kombucha drink, you end up doing this, and you have this idea that you're going to not have anything polarizing in it, that makes a lot of sense, as a way of expanding it.

(14:05):

And for people, I would guess, your ideal type of consumer is somebody who is interested in probiotics, has heard about them, wants to try them, but probably isn't going to go immediately to GT Dave, which looks like a hippie drink, looking for something a little bit more approachable. So, you have this idea of making this product. How do you end up testing that and validating that in the market and saying, "Okay, this is actually true and this is working."

Bill Moses (14:28):

Well, it's interesting, because there's a lot of quant and qual testing that we could do, and I think at that time, I didn't do any of that. I also had a yoga retreat center, meditation retreat center in Ojai. And so, I would have a lot of that demographic, target demographic, or psychographic, that would come up there. So, they were my Guinea pigs, so I would bring different flavors and drinks to them, to see really what they resonated with. We'd do, almost like a consumer intercept, with questionnaires and everything. So, that was really the way that I got directional confirmation around flavor, organoleptics, et cetera. So, it was really 1 on 1, or a small group of folks that gave me their feedback in real time, so I did it.

Daniel Scrivner (15:18):

That makes sense. Okay. I want to talk about PepsiCo. Before, we're going to talk about in a second the transaction to ultimately sell KeVita to PepsiCo. But you talked about before, you hinted at, just how difficult it is. So, if we zoom out from KeVita how difficult it is to get a strategic on your cap table, as an entrepreneur or a founder, which is obviously very important. Talk about that and what it took to be able to get PepsiCo to say yes, to join, to invest, to become a part of the board.

Bill Moses (15:44):

It takes a great product. They really got to believe in your capability and competency, in making and scaling a product. So, that's the first part of any strategics interest. Obviously, they've got to see a trend, PepsiCo was seeing better for you. They were seeing fermented drinks. There's got to be a trend. So, that's also the piece.

(16:11):

Look, I mean it was really hard, Pepsi came in, they had a great interest, we had a term sheet and I just couldn't get him over the finish line, it was really a process. And I remember talking to my banker Mike Bergmeyer over at Whipstitch, and he said to me, he goes, "Maybe we should go to Atlanta and talk to Coke."

(16:35):

And I said, "Great idea." So, we went to Atlanta, we went to the corporate offices, and presented to them, I got a term sheet from Coke. And as soon as I got a term term sheet from Coke, I closed PepsiCo. So, I think creating a dynamic where they know that you are an opportunity in a commodity that they don't want to have slip to a competitor, or it could fill their agenda, PepsiCo had an initiative called Naked Emerging Brands, and they really wanted all their better for you business to go through there, and they had a real corporate objective. And so, really also, working through and understanding your strategic investors' strategic plan, is really important, so that you can continue to match and mold your core competencies, to meet theirs.

(17:35):

And during the PepsiCo investment, where they put money in, they sat on the board, a lot of strategics provide strategic help, and a lot of strategics just want to watch and monitor their investment. PepsiCo really wanted to team with us in ways that were really beneficial. And I really respect that in that organization. And anyway, just getting aligned and understanding what it is that they need and they want to see, that suits them, was really part of the development of the partnership.

Daniel Scrivner (18:10):

I mean, in many ways goes back to your idea that to be a great entrepreneur, you have to be a great promoter. And obviously, in this case, it took one deeply understanding, their agenda, their strategy, how you were effectively going to repeat their own language and ideas back to them, and then it totally makes sense. It's not surprising at all, that going and getting a competitor's interest generates FOMO, generates this sense of, "Okay, everybody thinks that this is a good investment. Do you want in or do you want out?" You have to be able to create some leverage.

(18:38):

I want to talk about, so you get PepsiCo on the board, they end up investing, how much time goes by until you start to explore, discuss, the idea of a full acquisition? And was that a similarly trying process? And I know there's probably a lot of details potentially you can't share, but if you can share anything about that process, I think people would be interested.

Bill Moses (18:59):

So, it's interesting, in the non-alc world, and I guess to some extent, in the alc world, the first thing that most strategics look at is top line growth. What was really interesting about PepsiCo is that their valuation metrics dealt with top line growth. So, what are you doing? What is the growth rate? And the multiple would be adjusted based on that. And that's standard for most, but not all CPG deals. One of the things that became really self-evident, even though it wasn't baked into, let's just say, our deal structure, was EBITDA, cash flow, positive cash flow. And it was really amazing, because we were pushing to drive top line, while trying to maintain some business level of sustainability, but we weren't really concerned about operating deficit or losses, because of the top line.

(19:54):

But what was really, I think, amazing, was when we brought in our own manufacturing capability and fermentation capabilities, and really created a great supply chain. Our guy, Nate Patina, who came in, and brought in John Ballast, I mean these guys were just rock stars. Nate out of college and John out of other beverage companies. I got to tell you, creating a supply chain and an operational vehicle that could really bring your costs of goods down, and really bring your gross profit margin up, was everything. Because at the end of the day, when it really came down to Pepsi, when they were getting really close, they wanted to make sure that we weren't going to bleed them much. And so, we ended up changing our strategy a little bit, like has happened in other companies in today's environment, where it may not be just about top line, it's about whether, or not, there's a sustainable business, especially, if it's going to be used as a vehicle for future growth opportunities within that strategics business umbrella.

Daniel Scrivner (20:54):

Yeah, I mean in my experience, top line is very important, because it suggests directionally where the business is going. But top line without successful bottom line profitability, or just being revenue neutral, is just very, very, very different, because the world is full of companies that have amazing top line growth, but almost no shot in hell of ever being a profitable business. And so, when you can have both of those, I think, clearly it's a real business that has durability and it has a sense that it could get bigger and bigger and bigger.

(21:27):

The last question I want to ask about KeVita is, for you, clearly it's you found businesses, you scale them, you sell them. And so, I imagine clearly from day one, the goal was always to sell KeVita. I still would guess that in the moment, as you're getting ready to do this, these nerves come up, is this the right thing? Is this the right valuation? Walk us through that and how difficult, or not difficult, it was to eventually say yes to this offer and complete the acquisition.

Bill Moses (21:52):

There was a split on the board of directors, I had a great board, and we were, at that point in time, close to sustainability. So obviously, how much more capital needs to go in into the enterprise is always a consideration. But I will say, that we were looking at our trajectory, we were growing at 89% when they approached us, and we had a split board where they said, "Look, when you get a company that's scaling like this and you have this opportunity, you let it ride." Because going from $230,000,000 that we sold it for, to four to six, there's companies like Vive and other in the beverage space that was selling around the same time, Core Water, they were letting it go. And we came to a place where we decided that PepsiCo's interest was, and they really told us that they're not so open to letting this thing continue to go, because they want to know that there's room to grow the business.

(23:01):

They do their computation, and their math and they say, "Look, if we're going to buy you for a quarter of a billion, we want to make sure that this could generate an enterprise value of X, or revenue base of X." So anyway, it was a really heated board dispute, but ultimately I went with what my strategic wanted to do, because you know what they say, "Sometimes the first offer is the best." And when you've been working with somebody for so long, in your company, and you've trusted, to say no to them when they're ready to go and then go shop, or whatever, it's just not a great thing to do. I think the better approach might be for some, to not bring any strat on the cap table and then not be governed by their wishes and their desires, and the integrity of the partnership, and then put it out for an open bidding process. So, there's some pros and cons to both approaches.

Daniel Scrivner (23:54):

Yeah, just want to ask one tiny little tactical question, which is, clearly you brought up there the rest of the board, you know a lot about KeVita, you know a lot about your business, you clearly know what PepsiCo's offering you, but there's always this tendency, and it's almost impossible to fight, to look outside and say, "Well, look at this company that's got this multiple." And one of the things I've seen is just that it's human nature, it's human tendency, but that ultimately there's nothing really valuable there, and it ends up being destructive to get overly focused on other people. Do you have any thoughts on just how much you should be focusing on other businesses, and their valuations, and their metrics, and how much you just have to put on blinders?

Bill Moses (24:30):

I look at other businesses and what they're doing and how they're winning, all the time. I mean there's a couple of companies in our space that have taken me to school. And some of these entrepreneurs are half my age/ and I look at it and I go, "Damn, there's so much to learn. Times are changing so quickly." So, I do look at other companies and I do look at what they're doing and I try to take learning from them, but as it relates to their strategic moves, not really a driver for me, but certainly what they do on the brand side and product side is certainly something I pay close attention to.

Daniel Scrivner (25:07):

Yeah, you're always trying to learn tactics and you're trying to make sure that you're using those best in breed tactics. Makes sense. Okay, so I want to spend a few minutes now, talking about these in-between years of selling KeVita, this is before you've actually launched some of these first products with Flying Embers, and you're now doing some investing and advising. And maybe, just to start, I'll just open it up to you, talk about why you wanted to do that and what some of your hopes were for this investing advising phase, at that time.

Bill Moses (25:36):

It's interesting, I came out of the transaction to PepsiCo wanting to have a fund and be a private equity investor and do that, because that was really goes back to my roots on Wall Street. And I joined a firm, a great firm, Clear Lake Capital, and they set up a separate platform for me to go out and look for deals, and whatnot, and great guys, hugely successful private equity company out of Santa Monica. And I had that opportunity and I had my own platform, and hundreds of millions behind me.

(26:12):

But what I realized was, working within an institutional confines, organizations, you really can't follow your intuition as much as you'd like. And so, after about 10, 11 months, we parted ways in a healthy manner. And then, I just jumped into a couple of deals, that ultimately, they didn't want to do, because it was just too small for them, looking to put $100,000,000 in a deal. This was a very big private equity company. And I realized that in CPG, your first investment isn't a $100,000,000. And the scale that they were looking to do was beyond my interest in entrepreneurial investing. So, I went ahead and a couple of the companies that I showed them, I went ahead and invested myself, and brought some more venture related capital into it and became a strategic advisor and really got involved in that way, at that time, in a much smaller way than running a private equity firm.

Daniel Scrivner (27:16):

I want to ask a question about what attracts you to companies and what you're looking for, in order to invest and advise. And the reason, I just want to set it up really quickly, the reason I'm so interested is one of the things that was fascinating to me as I was looking at your background is, you've built multiple successful companies, KeVita, Flying Embers is doing great. But all the companies you've invested in, I know them, they're brands that I love, and they're brands that to me, succeed because of that focus on product quality, taste, flavor first, whether it's Iconic Protein, Wild Brands, Koya, Vive. So, talk about as an investor, what are you looking for, what are the non-negotiables, the must haves, and then what really gets you excited to be willing to jump into a company and a team?

Bill Moses (27:56):

Let me use a couple of examples of the companies that I got behind. With Wild Brands, this first thing is, is the product, or the product prospect, part of a growing trend and do they have a major point of difference that is hard to replicate by the larger CPG companies? So, with Wild, Jason was scrappy, hungry, type A, coming out of a tough reorg where some of his earlier products didn't work. And he had a new idea and a new product which was a protein chip, and it was a potato chip and was but on trend was paleo, on trend was, "I don't want to eat carbs, I want to have protein." And so, out of that I saw a real opportunity to have something that's really innovative, that tastes great, that could be on trend, and nobody could replicate it, anytime soon. So sure enough, we went ahead, and I invested and I got some private equity guys in, Carp Riley, Alan Carp whose been an unbelievable partner with me on several deals. And anyway, that was really the point of difference and the opportunity there.

(29:10):

And now, some years later, they're on fire, Costco nationwide, Kroger adoption, the product is amazing and we've got a big strat on the cap table, and we're just growing the company. So, that was a unique aspect of that.

(29:33):

I think with Koya, same thing. You look at this product which is a protein drink and it was a really great tasting protein drink and Chris Hunter was this guy, a partner at Four Loco and what a story and challenge they had, and come back and he was one of the partners there, and he was also had ties to my hometown. And we met, talked, we connected. I said, "This guy's a driver, this guy is not going to quit." And sure enough, some years later Koya is on their way to doing $40, $50,000,000 in sales, and has got these great product lines, one of the leaders in the challenging BoldHaus and Naked Emerging Brands and everything. So again, another case where protein, better for you, low sugar, keto, all the attributes, but a great tasting product with a great leader.

(30:21):

And then again, in an earlier segment I was talking about Five Organics, where obviously immune shots were happening and they had an amazing opportunity when COVID came around. But when you have an entrepreneur that was so focused on attention to detail, that it blew my mind that this guy didn't let anything go by. I mean, I think I'm an attention to detailed guy and Wyatt was just everywhere all the time. And again, great entrepreneur, great product, really served a niche where there was a huge need for immune support. And so, sure enough they transacted to Soja and Pain Schwartz. So again, quality and conviction of entrepreneur, category on trend rising, points of difference that aren't easily replicable. And I think that's really the ingredients I look for in investing.

Daniel Scrivner (31:17):

Yeah, that's very well said. I mean I think, we're definitely going to take a quote of what you said at the beginning, because I think it's a perfect formula. And it takes some of those ideas of differentiation, but it makes it incredibly clear the type of differentiation you're looking for. I think is really interesting.

(31:30):

I want to ask a question about Iconic Protein, which you didn't cover there. And the question I'm curious is, so when I think about stuff like Koya, Wild Brands, there's somewhat novel, or there's something new there, that you're not clear what category that goes in, or if it's in a category, it seems very different. When you look at something like protein drinks, in some regards you're like, "Well, there's not that many of them." At least it doesn't seem like ones that sell incredibly well. How do you go about deciding, I guess, to you stood out about Iconic Protein and when you're looking at a somewhat crowded category, does that change your math, your computation. At all?

Bill Moses (32:06):

So Koya is plant-based, on trend, small category, I mean, it's been growing quite a bit. Iconic is dairy based, lactose free dairy based, and so big category, dominated by old players. And so, seeing the protein trend, I naturally was attracted to Billy and the Iconic team, and I saw the great size of the category, and thought that we could disrupt with innovation. But I will tell you though, the challenge that we've had with Iconic, is that you are in a category that isn't growing. Dairy based protein drinks have been flat, more or less flat, over the last three, four years. So, our challenge has been how do you innovate within a category that isn't growing? And I think it's posed some ongoing challenges, where our top line has been relatively static for a couple of years now.

(33:08):

But the thinking and the thesis was, maybe overly confident, that we could go into a really big category and create enough points of difference to change it. But at the end of the day, I think in traditional dairy based protein, your consumer isn't really looking for adaptogens, or maybe keto, or maybe immune. They really are the Ensure, or the Boost, that are just trying to get enough protein in a day, because they're trying to just get through the day, versus go to the next level. And that was the learning there, but that was flush.

Daniel Scrivner (33:47):

Yeah, no that makes sense. It does seem like the protein category, in a weird way, is just like, "I'm going to buy whatever has the highest protein count in it, regardless of taste, or flavor, or quality."

Bill Moses (33:56):

Certainly in the dairy based space, that's proven to be the case.

Daniel Scrivner (34:01):

Yeah, that's really interesting. I want to transition, obviously, to Flying Embers, which is the company that you've been building now, but I want to start with a bit of a tangent, which is around this idea of better for you category. And this is something before talking with you, before deciding to do this interview, that had not been a term I had ever heard, this better for you category. And talking about it, I think you had a very clear way of describing what it was, but also this idea that it's actually been through multiple incarnations, there was a 1.0, a 2.0 and you know said at the time, you felt like we were in this 3.0 now. Talk just about the category, maybe for people listening that don't have any context. What is it? Why does it matter? And then talk about that 1, 2, 3.0 change

Bill Moses (34:42):

Starting in adult beverage or alcohol, I think the White Claws of the world, the hard seltzers were really better for you 1.0. And what that really involved was, it wasn't something that was highly crafted, but it was something that had no gluten, wasn't heavy, low carbs, low sugar, and crushable. And that sort of feeling of lightness and vitality that you got out of something that was so light, that had alcohol in it, was 1.0 better for you.

(35:19):

Fast-forward a little bit, we're in the hard seltzer category, we had Vizi, Molsen Coors brand that came out with antioxidants and vitamin C, and I would say that that was 2.0, maybe 3.0. And of course, we also saw there to be an opportunity to go there with our hard seltzer, given that we had probiotic expertise, so we came out with antioxidants, vitamin C and probiotics.

(35:50):

But what we really learned was, in the adult beverage space, alcohol space, anything that starts to get a little too forward facing, consumer messaging, health oriented, or with even a halo, really has really gets a lot of pushback, gets a lot of pushback from consumer advocacy groups. The FDA hasn't really gone aggressive on folks like us, but there has been a lot of class actions and just a lot of consumer groups that feel like maybe a more responsible approach, since while we advocate drinking moderately, and with such moderate drinking, there could be some better for you attributes at the end of the day, it was such a lightning rod and maybe justifiably so, because alcohol is abused so much, that anything that gave anybody, that wasn't a responsible drinker, reason to do more and drink more, probably wasn't a great value proposition to have out there. And so, that was some of the learnings in going into better for you alcohol 3.0, that we have wheeled back significantly recently.

Daniel Scrivner (37:13):

I want to ask how you feel about that, because hearing you talk about that, to me, it just seems completely backwards. Where I think it's very fair to say consumers are going to drink and I know many people that are either they don't want to drink, or they're just being very conscious about what they're drinking when they're drinking. And so, it feels weird to me to say these people can't have better options, because they should just not drink when clearly the realities are just going to keep drinking.

Bill Moses (37:36):

It's really interesting. I mean, I have a personal passion around this ability to have truth in label, transparency, veracity is really important, and there is research out there that does support moderate to light drinking, could not necessarily be detrimental to you, in fact could have some benefits. And that when you look at coming forth with a naturally fermented beverage that actually has real functional, beneficial bacteria, and you can't point to that. I'm not saying that it's going to shear your digestion or I'm not making any of those claims, but say saying what it is, I find it to be completely frustrating and limiting.

(38:27):

But I think when you've got other stakeholders involved, and a strategic involved, I think that's a challenge. There are folks out there, I mean look, there's leaders of the non-alc kombucha space, I don't want to mention him, who just take class actions as a course of business. It's a normal course of business, I'm going to take them on, I'm going to litigate them, or I'm going to settle them. And they maintain their position of, maybe aggressive, consumer facing messaging, and some of them have built billion brands doing that. Unfortunately, I think given the dynamics that I'm in right now, that's not a fight I want to have. But it is super frustrating that there are advocacy groups out there, and class action lawyers, that really inhibit you doing that.

(39:16):

And I will say this, being someone that actually had a behavioral health digital media company that dealt with addiction issues, as well, at some point in my life, I mean being sensitive to that population group, really is something that I'm mindful of and understand.

Daniel Scrivner (39:39):

No, I mean very well said. It sounds obviously, deeply frustrating, it's also reality. And as with anything in business, you have to make this risk reward calculation and it just doesn't feel like it nets out in a positive place for you to be able to do that, so I mean I understand it.

(39:52):

Okay, I want to talk about some of the things about the product that I think are just fascinating. And so, before Flying Embers, you founded a company about two years before, and maybe you can clarify some of that timing, that was R&D around fermentation and I think it was Fermented Sciences. Some of the questions I have is like, did you know that you were going to create a fermented cocktail? Did you know that that was the end goal? Or was this more set up to explore science and technology, and how to develop products around fermentation?

Bill Moses (40:20):

Fermented Sciences was really, the genesis of it was in the R&D room at KeVita. When PepsiCo had already signed the documents. We had, I don't know, two or three months of transitioning, and we all sat around the room and we're like, "Hey look, we do so much work on fermentation. I mean the core competency around really unique ferments is really deep." So, we thought why not go ahead and start. So, we started a company, Fermented Sciences and it really is still, it's the parent company, the holding company for Flying Embers. But no, I had no real visibility as to I'd eventually do a fermented can cocktail. And all I know is that I wanted to take all the learning, the years of learning and R&D, and really take fermentation to another level, and alcohol or non alcohol. But yeah, you start with core competency and a vision, and where the product ultimately develops and goes, is a matter of fate and destiny, in my mind.

Daniel Scrivner (41:24):

Yeah, it was very well said, especially for an entrepreneur that I think has made a fascinating, fermented canned cocktail beverage. I want to talk for a second, and just have you describe what's different about your canned cocktails, because number one, I think the biggest thing that I learned was, there's actually no alcohol, which is obviously surprising, and that's because of the fermentation. Talk about just how different it is of a product from other canned cocktails.

Bill Moses (41:47):

Yeah, first off, is the research that we did, we came back to realize that people that want to have a margarita really want the taste of a margarita and then a little bit of something that might be better for you, the 1.0, I would say. And so, what we looked at, we explored doing spirit based margarita with tequila, and a non spirit based margarita. And after the research came back we were like, "Hey look, and in a majority of states in the United States, you can't put a spirit based canned cocktail on the grocery shelf." And then you looked at the tax implications, and you looked at all the other factors. And we went into R&D mode, and we realized that with a particular unique fermentation that we use, and with some innovative fruits and juices, et cetera, we could make a margarita taste like a margarita, without necessarily having any tequila in it. And not be faced with tax implications and the limitation at shelf in many states, and so that's where we went.

(42:56):

I think one of the unique things that I brought from wine making, was that I realized that barrel aging really does impart important flavor attributes. So, in our unique fermentation around this mojito and margarita, we do barrel aging, and we take tequila barrels and rum barrels, and we use those, a particular toast, or an organic offering of barrels, and we do some toasting, and we do some aging in that, as well. So, I think that really helps add a little additional craft to it, above and beyond the unique fermentation expertise that we use to do it, so that's why we decided to go in.

(43:39):

And when you think about trends and rising tides lift all ships when we're looking at our kombucha category and realizing it's growing, it's interesting, and we think in the long run it's always going to have a place. We have a national footprint, we have people went from Florida to Chicago to New York to Washington to Texas, and we built this national footprint. And all of a sudden, when you see that the liquid going through the pipeline isn't enough to keep that burn, or reduce that burn, we realized we had to come out with something that we saw was the beginning of a trend, not something that was at the top of the trend. I think I mentioned to you earlier about the hard seltzer, and we thought that we had a point of difference enough that we could enter, even though all the big guys from Boston Beer to AB, are all coming out with something similar and that was the rationale for moving into that product line.

Daniel Scrivner (44:32):

Yeah, I mean the barrel, my guess is that that is the difference maker and that consumers can taste that and that it actually feels like a premium beverage, because I think my experience with a lot of canned cocktails is, it's just disappointing. It's 10 to 20% less as good as a cocktail that somebody made you at the counter, because it just doesn't have any of those crafted elements. So, I love that idea, that approach.

Bill Moses (44:53):

No, totally. I think that. And we have, like I said, there's some unique fermentation processes that it's not just a pure sugar brew that some other folks do. So, I think we nailed it, early indication out of Texas, we got a lot of H-E-B stores, and the velocity is really strong. So, we're excited about the opportunity.

Daniel Scrivner (45:15):

That's exciting. I want to ask one more question, which is, it feels like there's a tailwind behind this. As you came out with this, were you more encountered with skepticism and what the heck is this? And just you need to educate the consumer and people maybe are open to experimenting but they're not quite ready yet. How easy was it, and how quick did you see adoption, and did you feel any friction?

Bill Moses (45:38):

With consumers, it's been pretty quick. All the consumer adoption everywhere we go has been pretty quick and rapid. I think really the taste is great, zero grams of sugar, zero carbs, organic, full flavored, all that stuff. And the price is right, it's a six-pack variety. So, I think we nailed all that, we got all lined up.

(45:59):

Retailers, as well. Retailers, we're early enough, one of the things that was a discussion with our board and our strat was, "Are you moving too fast?" Because we might have moved too fast into the hard seltzer category, and lost our footing a little bit on the hard kombucha. So again, we had to really rationalize that if we're really going to make a play as a small company, we really got to get on shelf sooner, because once everybody else is on shelf, we're not going to get on. So, we got to be an incumbent, not necessarily a challenger brand to a lot of existing. So, we really had to sell the board and our strategic, with really going there, when there was some resistance and justifiably so. A lot of work to create the product, a lot of work to test the product, to validate the product, and then a lot of work to get the board and the financial community to step up to put more money in, to really drive the product nationwide.

Daniel Scrivner (46:56):

I want to close out by just asking some advice and talking about some lessons learned, because there are definitely founders, entrepreneurs, listening to this that are inspired by what you've built. So, the first question I wanted start with, is just what advice you would give to founders working in the food and beverage space? And I think maybe another way of framing that is, what have you learned the painful way, that you can help people save time and have a less painful journey?

Bill Moses (47:19):

So, I'm a product and business person. I never really, I think, appreciated the value of building brand earlier on. And I think what I regret, and what I would recommend going forward, is that anybody going into food or beverages, begin to look at their early business model with bringing influencers in that could help amplify the brand, and define the brand, to the target audience. A couple competitors in the space have done that superlatively, and we are now. We have a strategic partnership with UTA, and we have brought them in, investors, et cetera. Now, we're working and hustling to get those influencers, so that we could really get out there.

(48:08):

And what we also learned, is that user generated content, or influencer content, is really what matters in this space. And we spend a lot of time and money doing our own content, but what consumers really want to see is an endorsement, they don't want to see another brand trying to pitch their stuff to them, because it's really been saturated. So, I would say that one thing, bringing them in and having a structure on your cap table, where they invest or you take a share of equity, or options, and bring them in, is really a critical piece in today's brand building, that I don't think you could win fast enough, without that piece of strategic relationships.

Daniel Scrivner (48:50):

Yeah. I want to ask just one clarifying question there. You clearly talked about that part of this is obviously just marketing through testimonials. So, it's people saying, "I love this." It's someone you respect, someone you follow, you're clearly going to be interested, but you also used a really interesting word, which is helping define a product for consumers, that seems really interesting to me. Talk about that angle, and I guess, how influencers can help even, I guess just educate consumers, so not just telling them to buy it.

Bill Moses (49:13):

I mean, I think the way that they speak of it organically, it works into their daily routine and it's just so much more. But we think we know how to speak to consumers as brands, but they're not really our consumers, yet. And yet, we're thinking, maybe somewhat arrogantly, that we know exactly what to say to them, because we think we know them and we do the research to say, "Oh, they're interested in this and this." But ultimately, there's a different way in, and the way into consumers, when you have an influencer that has 1,000,000, 5,000,000, whatever it might be, followers, they already understand the language. They already have perfected the form of communication, and the nuances of speaking about anything, particularly a product, is so unique to that audience, that only they know that language, and we don't. So, I think that's what I'm really trying to get to. There is a language to communicate to a target audience, that unless you've already engendered them as part of your ecosystem, you're a fish out of water trying to break through that way.

Daniel Scrivner (50:26):

Yeah. Well, another way of saying that is I feel like it's great to have a marketing department, every company needs a marketing department, there's a certain speak and language that seems to emanate from marketing departments that can almost be just a non-human form of communication. Where when you hear an influencer or just somebody talk about the product, you're like, "Oh wow, this is such simple language and yet it's so clarifying." And you remove all the jargon, all the kind of bullshit.

Bill Moses (50:51):

Really important I think in brand building today.

Daniel Scrivner (50:54):

I want to ask one more closing question, which is just the biggest lessons you feel like you've learned, looking back. And so now, the question I want to ask is, as you look back in string together, KeVita, Koya, Wild Brands, the companies not only you founded, but that you've invested in, what are the biggest lessons that you've learned? And maybe part of it's just as an investor, not as a founder, an entrepreneur.

Bill Moses (51:17):

It's always going to take more money than you think. That's the first thing. I mean, really, and I can't underscore that, even the best of plans in this space, its one in 1,000,000 that really exceeds the business plan. So, really preparing for the long haul, and if it's a capital intensive business where you're building your own manufacturing, et cetera, just know that it's going to take more money than you think.

(51:45):

I think the other thing that really has been a learning for me, at my life stage, with my career, is that sometimes being successful and being known as a successful entrepreneur and businessman, affords you a lot of capital that isn't necessarily best for the business. And I think there's something super valuable about a business that is scrappy, where you have entrepreneurs that are living in a not so opulent way, and that level of hunger, and tenacity, and scrappiness, I think really translates into ideation, innovation. I don't know what, a special sauce. And so, I would say that success doesn't always breed success. That sometimes success could be a great experience to pull from, but when you have an opportunity, with success, to raise a lot of money from a lot of folks, it doesn't always translate into the best model to win, and that's something that I've learned.

Daniel Scrivner (52:56):

Yeah, I mean I love that insight and I love that idea that, you could raise an abundant amount of capital, but ultimately the better thing net net, is to have a business that biases towards scrappiness, towards constraints, towards creative constraints, I love that point.

(53:11):

Thank you so much for the time, this has been so much fun. I highly encourage everyone listening to go and try Flying Embers. Thanks for coming on, Bill.

Bill Moses (53:17):

Thank you, very much.



On Outlier Academy, Daniel Scrivner explores the tactics, routines, and habits of world-class performers working at the edge—in business, investing, entertainment, and more. In each episode, he decodes what they've mastered and what they've learned along the way. Start learning from the world’s best today. 

Explore all episodes of Outlier Academy, be the first to hear about new episodes, and subscribe on your favorite podcast platform.

Daniel Scrivner and Mighty Publishing LLC own the copyright in and to all content in and transcripts of the Outlier Academy podcast, with all rights reserved, including Daniel’s right of publicity.

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