Podcasts
What if Steve Jobs Ran a Meat Company?

It would probably look a lot like Lenny Lebovich’s Pre Brands.

Bringing his entrepreneurial spirit to the C to C podcast, Lenny Lebovich talks about innovation in the meat industry and how he got his own brand off the ground—with inspiration from none other than Steve Jobs. If you’ve seen Pre Brands in stores, then you have an idea of what sets this high-quality grass-fed beef company apart from its competitors.

But on today’s episode, we’ll go behind the brand strategy to explore their unique approach to packaging, supplier relationships, staffing, and more. As founder, Lenny has great advice on who to hire, how to stay true to your why, and how to build a successful CPG company even if you come from a completely different industry. Look for Pre Brands in stores near you, or anywhere Amazon Fresh is delivered.

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Lenny Lebovich: If Steve Jobs were to enter the beast category—may he rest in peace; so that’s never going to happen—yeah, he might take a similar approach, which is design a product from the consumer backwards, and focus on a consumer experience that is so definitively superior. That just builds tremendous brand loyalty.

Gary Nowacki: This is C to C where we cover innovation in the food and CPG business from conception to consumption. Welcome to the podcast, everyone. Today, my guest is Lenny Lebovich, founder of Pre Brands. 

Lenny, welcome to the show. We’re interested in hearing your thoughts today.

Lenny Lebovich: Well, thank you so much for having me. Great to be here.

Gary Nowacki: Thank you. So before we jump into what exactly Pre Brands is and how you differentiate yourself in the food and consumer marketplace, why don’t you give us some background about Lenny Lebovich and what makes you tick? 

What makes you excited to get out of bed in the morning and maybe a little bit about your journey? You originally started out in the financial industry. And how did you get into food?

Lenny Lebovich: Yeah. So I’ve always been kind of an entrepreneurial kid. I had different kind of entrepreneurial businesses as a kid, all legal, I might add. But in anything from having a baseball card, of course, collectible business to law and routes to—I would do anything that would basically expand my piggy bank and came up with creative ways to do it. 

But I went to do the financial industry coming out of college because I wanted to kind of build a foundation, build some credibility. I went into investment banking and was an analyst and kind of spent a few years in that industry doing transactions that were pretty complex for some large companies and working with really high-caliber type-A people. 

I ended up getting into the food business because a college roommate of mine, his family of all things, had the oldest operating meat company in Chicago.

He knew that I’d had experience doing things like, basically, capital-raising acquisitions, corporate strategy. And he really trusted me. And for a lot of family businesses, that kind of trust piece is really important.

Continue reading the transcript:

Lenny Lebovich: So, they came to me and said, “Hey, can you help us expand strategically?” We ended up buying a business, all the while thinking I was going to be a board member of the business and kind of help oversee it. And next thing I know, they’re like, “Hey, can you kind of jump into this thing and kind of figure it out and run it for us?” 

So, I went from kind of working with, let’s call it, accountants and lawyers and deal people and in a nice office, to having to run kind of a meat manufacturing company in suburban Chicago. It had a union and had labor and equipment and trucks and pretty much everything I knew nothing about. So pretty steep learning curve. 

But I came out of it from the perspective of a financial person. And I asked a lot of questions and kind of didn’t always assume I have the answer and try to kind of get the right people involved and kind of figure it out. 

So, we ended up kind of buying this business and turning it around and growing it significantly. And I ended up selling my interest in the business to my partner and his family. They consolidated it with their larger company, and ultimately, sold the whole thing to a big Chinese investor. But that really kind of got me into this food business and gave me kind of interest in all things consumer and retail and trying to kind of address consumer needs.

And I learned a lot about what prevents companies from kind of innovating successfully or properly within the confines of an existing business. And I decided that I was going to stay in the food industry but I was going to build the next business from scratch. 

My view is that it’s really hard to change a culture—some might argue impossible. And if you can kind of build the right culture, and culture is usually a function of, kind of more than anything, people, then you have a really good shot at building something special.

So, you asked about what gets me out of bed in the morning, is that first and foremost, I’ve given this a lot of thought, and I’ve seen myself in different situations. I could be in a really [inaudible] situation, but if I’m doing it with great people, I’m still going to be pretty excited about it. Now, if I can work with great people and work on something that I care about, that I’m excited about, it’s magic. So for me, it’s really just, kind of, working with great people and working on things that I’m excited about doing.

Gary Nowacki: That’s fantastic. So I guess at the end of the day, you chose food over finance.

Lenny Lebovich: Well, I chose food over finance. I mean, I’ve worked in beverage, I’ve worked in other consumer, I worked in telecom, I’ve worked in a lot of different businesses. But I like food because it’s very real. It’s going through transformation. It’s very personal to people. 

So, the whole idea, you can touch it, literally taste it and all that, and benefit from it, I think is great. And I’m a people person. I love to talk to people. So when you’ve got a food product on the market, you’re naturally going to have conversations with people about the choices they make in food and what do they think about your product if they tried it. 

Or if you’re an entrepreneur, you probably are carrying your product with you, trying to get people to try and give you feedback. So, I love the social aspect of it. Also, for me, is it makes it easy to have really interesting conversations with people. 

Gary Nowacki: We don’t all understand derivative investments, but we all eat food, right?

Lenny Lebovich: Yeah. I remember when I was in investment banking, and I dated somebody, and she happened to be an artist. And I probably explained to her a number of times exactly what I did, and it was, based on the day to day, she’s like, “Yeah, he just works in finance,” because it’s just, it’s not real to people. It’s just, it sounds like you’re pushing paper around and manipulating numbers and spreadsheets. 

But yeah, so the real aspect of food, to me, is really interesting. It’s a lot of how people say they love real estate because it’s very tangible. I think food has many of those same attributes.

Gary Nowacki: So, tell us about your journey, founding Pre Brands. What’s your mission and the company’s mission? And at the end of the day, what makes the products different?

It all starts with, kind of, a single overarching idea, which is that give consumers what they want on their terms instead of trying to kind of get consumers to buy what you want to give them on your terms. 

Lenny Lebovich: And I would say in a lot of these segments, particularly commodity-type segments, they’ve been so used to, basically, creating supply and then finding demand for that supply. Very few people in any of these kind of, typically, commodity or fresh segments which are more commodity in their kind of culture and mindset, really ask that question. 

So I basically said, “Well, look. We don’t have a business yet, and I want to understand what consumers want in this segment. I don’t believe that consumers are getting quite what they want in this segment, so let’s figure that out.” And we learned, kind of, what consumers wanted, which didn’t really surprise us. 

I think consumers ultimately want food that tastes great and is good for them, and they want to have confidence that it delivers on those things. And there wasn’t a lot of equity in the marketplace around those attributes, that consumers were kind of used to, just, kind of going and taking what they can get and hoping and praying when they went to the store that they picked their meat right.

And we kind of said, “Well, there’s science. There’s technology to kind of figure out how to, kind of, make sure that consumers have the eating experience that they want.” And then, you can build supply chains to make sure that the product is delivering the nutritional value it needs. And then, you can kind of build packaging to get consumers comfortable with what it is, and kind of express what you’re about and why it matters and why they should value it. 

And we, just, kind of went from the consumer backwards, and we built products and supply chains and packaging and distribution and everything around, “How do we give consumers the very best possible option in the marketplace? How do we build confidence and loyalty in what we’re doing for them?” And if we do that, it’s a large enough segment that I think it becomes an interesting proposition for investors. And investor capital I knew would be the fuel that would allow us to sell.

Gary Nowacki: So, if I’m a consumer and walk into the store and I see a Pre meat product, why do I buy that? What makes it different? And if I really like it, why do I become loyal to the brand?

Lenny Lebovich: So if you went into a store, typically what we would do is we would sell into a retailer like a brand block and we knew that in a large retail store with tens of thousands of SKUs and in a meat case that is just really chaotic that we would need to stand out and we would need a physical presence in which to do that. 

So we typically wouldn’t launch a retailer unless we knew that we would have a minimum of six facings and that those six facings were together so that we had that brand block. And then we would basically capture people’s attention by virtue of color and other kind of what’s called features of that brand block that would get consumers interested in learning more about it. And that was things like color, packaging, display elements, point of sale elements within the display. 

Our package was completely different. Instead of product laying down and basically not something that you could walk by as a shopper and see the way you might in a cereal aisle or any other aisles, our product was propped up so you could see it.

The packaging was a different color and was really, really kind of—I would say I’m biased—but beautiful and really, really stood out and I got consumers interested in interacting with it. And a key thing that we learned from consumers is that when consumers—this is just kind of doing ethnographies in the field—is consumers really didn’t trust what they were buying and they wanted to kind of inspect it because it was such a high dollar ring within their shopping basket. 

And they’re sitting there kind of basically turning the product, trying to see what they can’t see because the products typically in a tray of Styrofoam or plastic, there’s all these stickers and we’re like, “Well why don’t we just enable them to see what they’re buying?” And if they could do that, they’re buying and they’ll have more confidence in it. 

And when they take it home, if we put the right product in that package and we can create a great experience then, to your question, I’m like, “What makes them kind of loyal to it?” Well, if you buy a product and it delivers on what you expect or overdelivers even on what you expect, you feel really good about it and you buy it again and same thing happens. And after a while, you’re like, “Wow, this is exactly what I expect to be getting every single time.”

And that’s I think how you build loyalty is basically being able to kind of continue to reinforce that you deliver on your brand promise. And that’s kind of how we built the business, is that we created great products, put them in great packaging, invested in building awareness and trial. And for us, trial was we wanted to get consumers to put this product in their mouth and understand kind of what went into that eating experience. And if they did that, we had a really high conversion of case trial and do first purchase and first purchase turns the second purchase. And ultimately, loyalty, if you keep delivering on what consumers expect.

Gary Nowacki: So, let’s describe the packaging for our listeners. I’ve seen it on the Pre Brands’ website. You touched on transparency, so you’ve literally made the package transparent on both sides. Can you describe the rest of the packaging and how it sort of reawakened a pretty mature category?

Lenny Lebovich: Yes. So, the package basically combines a number of elements. So, a tried-and-true technology in meat for a long time—and other categories as well—is vacuum packaging, roll stock film, where they basically remove the oxygen from the product. Oxygen is what causes shelf-life deterioration. So they removed that. And we basically took that. 

You can get different colors of film. And because we wanted to make sure consumers could see it, we made that clear. And then if you’re going to maintain that clarity, there’s just a lot of information you have to provide consumers and you will then obscure the product unless you have a platform on which to communicate. 

So, we created that platform in the form of a chipboard. And that chipboard needed to have a certain amount of thickness and durability to withstand a kind of retail, cold, often wet environment. And we took the clear vacuum film and then we attached it to this really thick chipboard. And basically, the product would hang from that chipboard in a way that you could pick the product up and inspect the underside, or without having to do anything, you could see it from the front. And that platform, this chipboard, was where we communicated. 

So, we can suddenly provide—because we created a uniformity of products which we thought was really important—I want to say we widgetized it, but because animals, unfortunately, are not exactly the same, we wanted to make sure that consumers could buy a consistent size, thickness of product, consistent nutrition profile, etc.

So, we did all that. We were able to communicate in the package the nutrition facts of the product that you’re buying, the changes in fat, calories, and we were able to make specific claims on reductions in saturated fat, calories, different types of vitamins. 

And this was the first time that people were really able to make specific performance claims on a meat package. And then we were able to have all the regulatory information that’s required after the USD establishment, different claims like Paleo-certified and non-GMO certified, all the things that consumers want to know and feel good about before they make their first purchase.

We were able to communicate on that package because we had enough of a platform in which to do it. And we also created a package that allowed consumers to see all the product that they were buying. So just tremendous confidence in the product when you’re in the store, which creates high propensity to give it a try. And then the product performs and then you have a high likelihood of repeat.

Gary Nowacki: So I want to talk just a little bit more about the packaging, then get to the product inside the package. But I want to say even the colors, even the color palette you chose and just the fonts and things like that, they’re not what you would expect with an animal protein product. 

And the way that the claims pop on here reminds me a little bit about somebody like RXBAR, for example, in the way that their claims are very prominent on the label. Did you take inspiration from other brands when you created this packaging?

Lenny Lebovich: Yes. So, I would say that when we create the packaging, and early on, I had a head of marketing, basically a cofounder, and she came from the beauty care business. She worked, of all things, for Johnson & Johnson®, and she was responsible for brands like Aveno® and Clean and Clear®, which your listeners may be familiar with.

Gary Nowacki: It almost looks like a trendy personal care brand package.

Lenny Lebovich: Yeah. And her mantra was, “I want to make beef beautiful.” And that was really critical. 

We really wanted to kind of take something that consumers almost kind of had an ick factor, too, like they didn’t enjoy shopping the meat category. It’s cold, it’s wet, it’s sometimes bloody. And we wanted to make it a great experience.

So, that kind of really influenced me more than anything. In terms of brands that I think about, it’s like Apple®. If Steve Jobs were to enter the beef category—may he rest in peace, so that’s never going to happen—but he might take a similar approach, which is design a product from the consumer and focus on a consumer experience that is so definitively superior that just builds tremendous brand loyalty.

Gary Nowacki: Yeah, that’s a good analogy because he was obviously a big design aficionado. So, we’ve talked a lot about the package, and kudos to you and to Pre Brands for some really compelling differentiating packaging. 

But let’s talk about what’s in the package now. It’s different from a lot of products out there. It’s all grass-fed, right?

Lenny Lebovich: Yeah, so it is grass-fed. One of the things that a lot of people don’t necessarily understand is that the global supply of beef is almost entirely grass-fed. And I would say that the supply of beef is—north of 80% of the beef in the world is grass-fed. 

In the United States, it is about 98% grain-fed. And if you were to rewind 10 years ago, it was 99%-plus grain-fed. All beef was grass-fed. All animals are raised on grass for a time. But in the United States we changed our beef supply chain to become more of a grain-fed supply chain because we’re really good at producing grain. 

Grain produces weight on animals more quickly and more predictably than grass does. So we converted our supply chain into a grain-fed supply chain, where I would say there aren’t too many arguments against us. We’re the best producers in the world of that. But we moved away from grass-fed production. 

The rest of the world didn’t have those same incentives. They weren’t as efficient grain producers. They had more land and maybe the right environments in terms of kind of climate, sun, rain, all that, good soil. So, they stayed on a grass-fed system. The problem with grass-fed is that similar to wines and similar to kind of any natural products is that you’re a product of your environment and the environment changes.

And there are times that the grapes in Sonoma and Napa aren’t that good, and the vintages aren’t that good. And consumers want to make sure if they’re really kind of wine aficionados, they buy the right vintages from the right vineyards at the right times. 

Well, the same kind of stuff applies to beef. It’s like you want to make sure that you are buying beef from the right places in the world, from the right animals that were in the right environments at the right times. And there are ways scientifically to measure that. 

And what we learned is that across the world that there had been a lot of investment in science to make sure that—to identify what makes great grass-fed beef. And how they thought about that was, the eating experience is a function of three major attributes: taste, tenderness, and juiciness. And if you think about kind of eating a steak or a burger, those are kind of the key components. 

And can you apply science to measure for that? And we leveraged that investment. It was like probably nearly $100 million investment in Australia to do that out of hundreds of thousands of animals over a number of years across the world. So you kind of got to get a sense for different taste profiles of consumers across the world.

And we leverage that science, and we use that to put specifications on our suppliers. And we basically said, “We realize you produce grass-fed beef. We don’t want to buy grass-fed beef. We want to buy beef that is grass-fed, but also has these other attributes.” 

And we found suppliers that appreciated what we were doing in the US and thought it would be a great opportunity. And they were willing to adapt their business practices to accommodate us, and basically allow us to curate what’s called the top 5-10% of their supply, because we wanted to make sure that when consumers bought our product, it wasn’t simply grass-fed, it was going to be great beef that happened to be grass-fed, and they can rely on it to be great beef every single time.

Because we think that the opportunity to create a large business is going to be more a function of delivering taste with health versus health with taste compromise.

Gary Nowacki: So that all sounds terrific, great taste and great health and all that. But can you get a little more detail? What are the attributes and the special occasion?

Lenny Lebovich: It’s things like, so breed of animal. In the United States, Angus is celebrated. I’d say that that’s kind of—they’ve gone a little bit too far with that. But in general, there are breeds of cattle that deliver particularly positive eating expenses and Angus happened to be one of them. 

Angus is a British breed. Hereford is another type of British breed. So, we would specify British breeds only. So, that would be one attribute. We would specify things like pH level of the animals. So, there’s body chemistry in the animal. That pH level is going to determine basically how well that animal is treated, what life it’s had, and that life is going to contribute to kind of the tenderness of that meat. 

We would specify size of the animal. So we knew that consumers ultimately wanted, let’s say, a steak that was a certain thickness that they would be able to prepare in the same way every time. And that is proportionate to the size of the animal because a ribeye, let’s call it a 1200-pound Angus steer is going to be very different sizewise than a ribeye and a 1500-pound Angus steer. So, we wanted to make sure we can deliver that consistently.

It was things like meat color. There’s variations of that. Well, consumers want a certain color. And if they’re used to buying something, people buy with their eyes. So how do you deliver consistent color of meat, consistent color of fat? 

Marbling actually matters. It’s not everything, but you want to have certain levels of marbling. So, you can get grass-fed beef that’s super lean and it has all the health in the world because it has no fat in it, but people aren’t going to really want to eat that very regularly. 

So, we wanted to kind of make sure we were able to calibrate all the factors that we understood from consumers would deliver the combination of taste, tenderness, and juiciness. And those were largely the factors. There are some others, but those were the kind of the most important ones, and we were able to do that at some scale. 

You can create specifications that get you down to the point where there’s one animal in the world that meets all those requirements. So, you kind of have to calibrate what’s called perfect world from a consumer perspective with real world and just kind of find the balance where you can deliver something reliably and at some scale, to turn it into a viable business.

Gary Nowacki: Okay. So, anecdotes coming back from consumers, what are you hearing out there? 

Is it, “Oh, I’d never tried grass-fed meat and now I tried Pre and I like it better than grain-fed,” or is it, “I tried grass-fed and it was dry and chewy and I didn’t like it, but Pre is not like that?” What are the stories coming back from consumers?

Lenny Lebovich: So what we heard, and we probably interacted with hundreds of thousands of consumers, we built the brand a lot through experiential marketing. So we’re literally doing demos and stores events where we’re touching and putting food into hundred to hundreds of consumers miles in a short period of time.

Gary Nowacki: As you’re experimenting or post-launch?

Lenny Lebovich: Well, we did some of that. Probably, we touched hundreds of consumers in terms of initial kind of research before we launch. And then once we launched, we were touching probably thousands of consumers on a weekly basis. And we were constantly getting feedback and learning and figuring out what we can improve upon, how we kind of position the information differently or whatever the communication is. 

We really want to understand what’s inherent in consumers’ minds to make sure that we’re communicating in a way that is most understandable to them, that is also most compelling to them.

So, one of the things that we learned early on is that while grass-fed had kind of gotten a lot of buzz, there was such poor execution of grass-fed to date. You had kind of a commodity industry that kind of said, “Okay. Well, we can check the box of grass-fed. This is grass-fed, let’s send this to market.” 

There was such an inconsistency in eating experience amongst consumers. A lot of consumers didn’t really trust that grass-fed was going to be able to deliver a great piece of meat. So many people kind of dismissed and said, “Yeah. It’s healthier for you, but when I have steak, I want a prime—”

Gary Nowacki: I want to indulge.

Lenny Lebovich: “—a prime great steak.” What I’m imagining, I want something great. 

So, in many ways, grass-fed was a liability because people perceived it to be an infuriating experience and something that didn’t want to repeat again. So over time, we ended up kind of actually taking grass-fed to become a smaller and smaller part of the brand communication, and really made the brand communication about what the brand represented, which is really around taste and health. 

And by the way, it has claims like grass-fed, like non-GMO, like no hormones, no antibiotics. But we really needed to figure that out from consumers to understand what’s in their heads and how do I think that they call it communication architecture. We really had to think through that brand and communication architecture to make sure we’re saying the right things with the right strength and in the right order to resonate with consumers and be believable.

Gary Nowacki: So you curated the heck out of this product. You took a commodity and you can even think of grass-fed as becoming a commodity now. But you said, “No. No. No. Not all grass-fed is alike.”

Lenny Lebovich: That’s correct.

Gary Nowacki: Is anybody else doing that in this category? Would you say you’re the leaders?

Lenny Lebovich: So I would say that, I mean, we were, for over three years, the fastest growing company in the United States in the category according to Nielsen. And we were seeing much better success in terms of measures like dollars per point of distribution, dollars per point of ACV. 

I mean, we are very kind of data-driven, metric-driven company. And kind of repeat loyalty, exclusive repeat, all these different metrics that brands, I think, look at and retailers look at, we were crushing it on. 

So, I would say I don’t know that anybody was doing quite what we were doing, and I would say that that was a function of just being built differently.

And one of the things that I decided early on was that we pretty much wouldn’t work with people. We didn’t hire any employees. And I think employees are ultimately the heart of any business. We wouldn’t hire anybody that really came from the industry. And the reason is not that people in the industry are bad. It’s just that people that have worked in the industry a long time, they just have a certain lens, and you start to look at things through that lens.

And it’s kind of like they say, to every surgeon, a solution involves a knife. Well, it’s like you just have kind of embedded in you a certain point of view, and that changes where you end up in terms of your decision-making. 

And I kind of said, “Just like this business is built from a clean slate, I want people with a clean slate. I want people that understand consumer and trying to build businesses from the consumer’s perspective, but I don’t want people of the industry.” 

I use the same example. I’m like, “It’s not like Tesla’s hiring engineers from Ford and GM.” The reverse may be true that Fords and GMs might want to hire the Tesla engineers. But if you’re going to get to a different answer, you kind of have to come from a different place and look at things holistically.

Gary Nowacki: So that’s obviously counterintuitive but yeah, very clever. And it ties into how you built your company and how you built your culture. 

But you need a lot of breathing room for that. How did you get all the breathing room? Because a lot of companies would say, “Hey, we’re burning daylight. Our investors are giving us pressure. Let’s go hire some experts, and let’s launch.”

Lenny Lebovich: So I think that a number of things happened. You kind of have to marry kind of proof of concept with capital at the right times. 

I’d say what was helpful was that we were, one, founded, in my case, by someone who had experience in the business and had credibility kind of with investors and had the ability to kind of convince them that what I’d done before can now be leveraged to do this bigger and better another time. And just understanding the capital raising process, I think, is really helpful. Building a team, I mean, it’s just basically getting the right people together and attacking a problem that matters. 

So, one of the things that, I think, investors look at is things like I guess they call TAM, total addressable market. How big a market is this? And when you kind of think about part of the reason that the Beyond Meats of the world that’s not public are valued so highly is because they’re going after a massive, massive market. 

And you can basically say to yourself like, “Hey, if these guys just get a couple of percent of that market, that alone will be big enough to reward all of us for kind of taking this risk and making the investment.” So I think that that’s helpful. 

Going after a large market, having the experience in that market, surrounding yourself with really great people, and then having early proof points that you can leverage to convince people that it’s not just a vision or theory, there’s a consumer need or white space that really needs addressing.

Gary Nowacki: It sounds like you had a good conflux of things going on. You had your background in finance. You were successful previously with a meat company. You knew how to pitch investors. A lot of people trying to launch in a category like this, they’re not going to—they’re not going to have that kind of background. 

What kind of advice would you have for mere mortals trying to move into a new food category? 

Lenny Lebovich: I think that this keeps being kind of a theme in this conversation in my life, but I would say just surround yourself with great people early. I would often say to investors and they’d kind of look at me funny. I’d say, “I hope I’m the dumbest person in this room.” And I kind of believe that. 

I think that it’s not important as the founder that you’re the smartest or the best. What’s important is that you’re able to recruit people that are the smartest and the best to attack difficult problems. So, I would say that make sure that you get the right people involved. And I think that if you get the right people involved, you give yourself a shot at being successful.

Gary Nowacki: Yeah. And it’s always spot-on advice, hire great people. But how did you do that? What was your pitch to get the best and the brightest to join Pre Brands?

Lenny Lebovich: Well, I mean really not a lot different than kind of pitching investors is that I think people are compelled by kind of what’s called big ideas going after big markets. So, size of prize matters to investors. I think it matters to prospective employees. 

One of the things that I kind of believed from the very beginning and will do any business I build down the line is equity is a really kind of important incentive. We’re building something. Are we all sharing in the rewards of the effort? So, I made every single person that was involved in the business an equity holder.

And then another thing that I did is I made their equity exactly like mine. And I thought that was really important because I didn’t want to sit in a room where people are like, “Well, what’s the founder’s incentive versus my incentive, and how are they different? Can he win while I lose?” those kinds of things. Those are I think really kind of like—those are cancerous almost to the potential of a team to do something great. 

So, I basically said to everybody, “Look, everyone’s equity is identical. We’re baking one cake. Yes, there are different slices of that cake but it’s one cake. And if we’re really successful and we bake that cake and it comes out delicious, we’re all going to be eating from that same cake.” And I think that was really, really important.

Gary Nowacki: What kind of response did you get from people when you explained that?

Lenny Lebovich: I mean it was—I mean it was awesome. I think that people really respected it. And it was like you attracted the right kind of people. 

I think that one of the things I found is that not everybody is comfortable with risk in this world. And one of the things that I did was you can hire away people, pay them as what they’re getting paid before, potentially more, give them equity on top of it, and of course, they’re going to be excited about it. 

But one of the other principles I had is I wanted kind of people to invest a little bit into what we were doing. And I wanted to give them out-sized rewards if we’re successful. So let’s just say, hypothetically, to keep the numbers simple, you are making a $100,000 a year, yeah, you’d easily come over if I pay you more than that, and give you equity. But I wouldn’t. 

I’d kind of say, “Hey, well, how about $90,000 and I’ll give you this equity? And if that equity works, the $10,000 a year that you’re basically effectively investing in the business could pay you 20, 30, 50 times that.” And if somebody was excited about that, that told me that there was a good chance that they were the right kind of mindset for doing something like this. 

And if somebody was kind of all around, all about salary, then I’m like, “It’s not kind of the risk-taking mindset.” And the upside, kind of let’s do this altogether mindset I wanted.

Gary Nowacki: Yeah. Great advice. So, we’ve been having a great conversation here. Lots of fun things your company has been through, packaging, really curating a different kind of product from the producers you work with, hiring best and the brightest, all that kind of stuff.

It all sounds good, but I’m sure there were a lot of bumps. Tell us about the bumps; what were some of the biggest challenges you encountered?

Lenny Lebovich: Well, I’d say that the day-to-day challenge in our business was—and I’d say, as much as I had kind of experience with raising capital—raising capital was a constant kind of challenge within the business. Kind of this whole—prove it, get investors to understand it, kind of get the evaluation in terms that reflect their understanding of that, and then kind of go back and build the business. 

I would say I would probably apply a different capital-raising strategy than I did. I’d say that I was always focused on things like dilution, maintaining control, if you will. And I’d say that if I could do this again, I would probably have raised larger amounts of capital earlier in the business. That may be less attractive theoretical evaluations, but I think we would have gotten further faster if the business didn’t constantly have to worry about capital. 

Another thing that I learned is that—I learned, I mean, a lot, I’d say. Made a lot of mistakes. And I think now I sound smart to some of these entrepreneurs, but I wasn’t that smart a few years ago when I made all these mistakes I’m trying to help them avoid.

But the people piece that I think is really just as critical, if not more so, is I hired a lot of people based off of resumes. I’d say that one of my blind spots, coming from investment banking, is you try to hire people that went to the top schools, that have the highest IQs, that have the highest GMAT scores, all kind of objective kind of criteria.

And I would say that what I learned is that’s not necessarily kind of the right background to be successful in a startup. Yeah, I’d say that emotional intelligence is more important than kind of raw intelligence. And ideally, you have both, but if you’re simply an intelligent person but you lack emotional intelligence, you’re going to be really, really a challenge to work with in a startup. 

And, also, I’d say that people that don’t have experience in startups—I would never, today, hire anybody in a meaningful role that hadn’t already kind of demonstrated they can be successful in a startup and de-risk that piece of it. 

I had people that I would describe as kind of want-to-preneurs. They came from large companies. They were smart. They had great backgrounds and accomplished incredible things but never really did it in a resource-constrained [way, like]”I have no idea what tomorrow looks like. I don’t have all the information I want to have. I can’t buy all the help I want to buy.”

That’s just a very different skill set. And I’d kind of say to people—I’m like, “Look. If you’re in a big company and you could turn $1 into $10, great. If you could take that $1—do it for 90 cents and turn it into $10, you’re a hero. Well, in a startup, you don’t have $1. So if you’re going to use a dime, you’re in the business of turning dimes into dollars.” 

And that’s just a very, very, very different mindset. I think it takes a different type of person. So, I’d say that on the capital-raising piece and on the people piece, those were probably the biggest mistakes in the development of the business.

Gary Nowacki: Hire from the school of hard knocks versus the Ivy League?

Lenny Lebovich: Yeah. But, look, I mean, I think that it’s good to have people that have those backgrounds. But I would take fire in the belly, as some call it, over kind of high test scores and Ivy League degrees any day.

Gary Nowacki: I’m here with Lenny Lebovich, who is the founder of Pre Brands. Lenny, you talked a little bit about the market research you did in-store. And by the way, kudos to you. 

The very first guest on this podcast, Eric Kiker of The Digestible Brand talks about how he thinks innovators and disruptors—instead of giving away those free samples in stores as a way to drive revenue, what they should really be doing is using that as a way to do on-the-spot consumer research. 

So, sounds like you did some great things there. Anything else you can share with our listeners on other market research you did or other product development research that you did that really mattered?

Lenny Lebovich: I mean we did some—because we had somebody that came from kind of a big CPG background. She had done the entrepreneurial stuff. She had worked in a startup before Johnson & Johnson. She had worked on the agency side with startups even before that. 

We kind of applied some of the CPG tools. So, we did things like qualitative research where we did focus groups. We did some online surveys. We did obviously kind of the ethnography. So, we did a lot of, I think what traditional kind of research does, but we were very involved. 

So, I’d say that oftentimes in large companies you hire somebody that you let them go out and do the work, you get a report. We’re going and watching this consumer. We’re like literally sending in questions like, “Hey, clarify this.” I think a lot of the time there’s a lot more insight to be had, but it has to be kind of the right people that are involved to ask the right questions. So I think that’s the approach we took. 

I mean, we didn’t have all the money in the world. We didn’t spend hundreds of thousands of hours doing stuff, but we probably had 25 to 50 consumers in total across different focus groups.

We did a few hundred consumers online asking questions and we had done a number of surveys. We put kind of key things in front of consumers like, “Hey, what do you think about this brand? What do you think about this positioning and story? What do you think about the packaging? What do you think about everything else that’s happening in the category? What comes to mind as you look at these other folks?” 

We really, really wanted to get as deep down into what’s in the psyche as possible because I’d say that the consumers and—Steve Jobs I think, always said this—if you ask consumers what they wanted 100 years ago, they would have told you another horse and buggy. 

So sometimes you just have to kind of really dig deep to understand kind of what the need is instead of asking them kind of what they want. Because I think at the end of the day consumers will want what they’ve seen before, maybe an improved version of it, but it’s hard for them to imagine what doesn’t exist yet. So you got to figure that out.

Gary Nowacki: Yeah, and they’ll fib to you too, right? They’ll say, “I’m not going to eat a lot of junk food every day, right?” But maybe they do eat a fair amount of junk food every day or what have you.

Lenny Lebovich: I would say yeah. There are many instances where what people say and the data of what they actually did, there’s a lot of daylight between those two and they often say, “Judge people not by what they say, but what they do.” And I think that is absolutely true.

Gary Nowacki: So, let’s talk about the category, the whole protein and animal protein category. So you touched on it. We have Beyond [Meat}, Impossible™, many other plant-based startups. 

Cultivated meat is still in the R&D phase, but it seems to be getting closer in terms of economies of scale. You’ve got the big companies like Hormel and Tyson and Smithfield and others taking their stab at new and innovative products. So what’s Pre’s strategy to continually have a nice niche carved out in this market?

Lenny Lebovich: So I think that what’s happening—and I remember Steve McDonnell, who was the founder of Applegate, so I have to kind of give him credit for this, he said this more than a decade ago.

Gary Nowacki: Great brand.

Lenny Lebovich: Yeah, he said, “The future of meat is less meat, but better.” And I think that’s what’s happening for the majority of consumers is that the reality is that consumers are really concerned about their health. They’re concerned about the environment, and animal welfare, etc. 

So, meat is for many people becoming kind of almost like a kind of a guilty pleasure. And when consumers make the choice to eat meat, they want to make sure that they’re checking a number of boxes for themselves to feel good about it. 

So I would say that Pre is positioning itself to be the very best possible option. So it’s great beef. It has to be more than anything, it has to deliver that, and then, okay, it has to check some emotional boxes for you, like it’s pasture-raised or grass-fed. So the animals are in a great environment. It doesn’t have hormones in a box. It doesn’t have GMOs, things of that sort.

So, we want to be the very best possible option to a consumer that’s choosing to eat meat more selectively. And then there’s going to be a variety of other options. So, the reality is that the majority of people don’t have the luxury of worrying about all these things. They’re just trying to feed their families. The average consumer in this country is kind of living paycheck to paycheck. So, this premium stuff doesn’t necessarily apply to everybody, but we’re trying to make that as accessible as possible for more people.

But I think that even people that are kind of struggling paycheck to paycheck, I think that they’re going to eat less meat, and they’re going to probably buy better stuff when they do. 

And then there’s the folks that kind of want a non-meat alternative. And I would say that the size of that market is going to be proportionate to the quality of the product and the kind of nutrition of the product. And I’d say that so long as there are great options like Pre out there that deliver great meat, and the alternatives don’t quite deliver that experience, I think that those alternatives will have a more limited kind of, let’s call market size than they’d like to have.

And then to the extent that those alternatives are extremely processed and viewed as less helpful, I think that will further kind of impair their opportunity. So, I’m really interested to see kind of how the plant-based options evolve. Can they kind of make them less processed? Do we need to have a 20-plus ingredient kind of processed alternative to a single ingredient natural item? I think I’m probably more optimistic on the lab-based piece because—

Gary Nowacki: Cultivated.

Lenny Lebovich: —yeah, theoretically, they can basically create meat. They can create the same steak, the same ground beef that you’re getting from a living, breathing animal in a lab. And if they can do that, and it’s a single ingredient product, I think that it has huge potential, then it’s a question of whether consumers are comfortable with the science and the health impacts of that science and then the cost. So yeah. 

But I think that—look, there’s just different segments. There’s the vegetarian segment, there’s the vegan segment. It’s just a huge market. So, there’s really, I think, a significant opportunity for anybody that’s actually listening to consumers has identified a segment of consumers that they want to be relevant to and then just focuses on delivering something great for that segment.

Gary Nowacki: I like your niche because flexitarians, we all know that’s a trend. And so even if I’m not a wealthy consumer, if I’ve decided, hey, I’m not going to eat beef three or four times a week, and rather than eat inexpensive beef three or four times a week, I’m going to eat a really good steak once a week and really indulge. And that sounds like a great opportunity for Pre.

Lenny Lebovich: Yup, for sure.

Gary Nowacki: So what can you share with our listeners about Pre’s long-term strategy and where the company might be going next?

Lenny Lebovich: So I mean, today, I mean, Pre is still a fairly limited distribution, so I guess the term is ACV, which is basically distribution share for those that are not quite as familiar with the acronyms like today, I mean, Pre as distribution in roughly maybe to 3% of the market. So, the goal is to scale Pre to be in kind of as much of that market that’s relevant.

Gary Nowacki: How many stores are you in today roughly?

Lenny Lebovich: About 550-600 stores.

Gary Nowacki: All Midwest Chicago?

Lenny Lebovich: Well, yes. So, all of the retail distribution is in the Midwest except recently we launched in the Northeast, in the New York area through Wakefern, which many people out there know it, ShopRite. And then we are available nationally through Amazon Fresh. 

And so, Amazon Fresh, I think, today I would say that they are able to deliver to like 80% of the population. So, we deliver to them on a weekly basis to all their distribution centers, and we do really, really well through Amazon consumers. Love that the reviews are fantastic, so. 

And then additionally, there’s the direct-to-consumer piece. So if consumers want to buy this, they can buy it directly from Pre and we’d ship it to you, and you can have it anywhere in the country. 

But the truth is that most consumers want to buy a product like this in a retail environment. And the big upside opportunity for the company is to get more and more retail distribution. And so working on that.

And a lot of it is just basically proving yourself in the market, having the data, demonstrating to additional customers that aren’t carrying it today what their opportunity is, how much more they can sell, which consumer they’re addressing, what the shopping basket looks like, how much profitability you’ll drive.

At the end of the day, retailers have a business, and that is to kind of maximize their opportunity within the square footage they have. And if you can demonstrate through data that you’ll do a better job for them than what they’re doing today, then it’s only a matter of time before I think there’s more acceptance. So that’s the focus. Just expanded distribution, really, west, east, southeast, etc.

Gary Nowacki: It makes total sense because your packaging is such a visual and a tactile experience for consumers, so why not get it in that meat case?

Lenny Lebovich: For sure.

Gary Nowacki: So, Lenny, before we go into wrap-up, is there anything else, any other words of wisdom you’d like to share with our listeners?

Lenny Lebovich: Well, I mean, I consider myself an entrepreneur, and some people may celebrate that, some people may curse it. One of the things that I love doing on the side is I like working with entrepreneurs, younger people. And for me, the big question I end up kind of distilling things down to for people is trying to understand the why around what you’re doing. 

Doing something innovative is really hard. It’s very risky. In all likelihood, you’re going to fail, and that’s hard for kind of people to get their head wrapped around. But I think that if you have the right why—and I think, what is it, Simon Sinek had this big kind of TED Talk about the why.

Gary Nowacki: The Golden Circle

Lenny Lebovich: I think the why is really important. Yeah. The why is important because the why is kind of that fire in the belly. It’s the emotional piece of it that is going to push you forward, help you solve problems, just get through the muck of trying to innovate and do something in the market. 

And I often joke that the world is happy being the way it is. And if you want to change it, even in some small way, it’s going to be a fight, it’s going to be a battle, and it’s not going to go exactly as expected. So the why is really what pushes you forward. The why is the blanket that keeps you warm at night.

If it’s about the what, it’s like things like, “Oh, I’m going to have more flexibility,” or, “I’m going to make a ton of money,” or whatever it is where I might—yeah, you’re kidding yourself. So, for me, I would recommend to people, if they’re going to go and try to do something really creative and try to innovate, make sure that you’re doing it for the right reasons.

Gary Nowacki: It’s good advice. Here at our company, when we onboard new employees, we have them all watch that 12- or 15-minute video by Simon Sinek on the why. It’s about being mission-driven, right?

Lenny Lebovich: Yeah. Well, it’s about being mission-driven. I think that society is kind of changing and consumers really appreciate companies that are doing things for reasons that they value. And we no longer can kind of hide behind kind of walls and kind of craft the message. 

One of the things I say is that over time you develop these kind of expressions and say, “We all live in glass houses and some of us believe that,” is that we can no longer control the message. You have to kind of do the right things. And that has to be how you’re built. 

You can’t do the right things because you’re going to be reviewed or evaluated for doing the right things. That just has to be who you are. And if you do those things and you communicate the why behind your business, an increasing segment of consumers will really appreciate it and they value it and that’s really where kind of I think the future is and where the growth is.

Gary Nowacki: Good advice. Good summary. I want to thank my guest today, Lenny Lebovich of Pre Brands. Lenny, thank you so much for being on the podcast.

Lenny Lebovich: This is great. I really appreciate it and hope somebody gets some value out of it.

Gary Nowacki: Thanks for listening to C to C where we cover innovation in the food and CPG business from conception to consumption. Just type the letters C-T-O-C, no spaces, to find us on iTunes, Stitcher, Podbean, and Google Play.

This podcast is produced for informational purposes and does not constitute any scientific, legal, or medical advice.

The views and opinions expressed by guests of this podcast are those of the guest alone and do not necessarily reflect the opinions and positions of the host or any other entity or organization. Listeners are encouraged to listen with an open mind and form opinions of their own.

This podcast originally aired on November 29, 2019.

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