Why is David Protein so Successful?

Why is David Protein so Successful? Speaker 1: One thing that really differentiates how we approach product formulation was that bucket of fat. Reducing fat is super essential in trying to reduce caloric load and maximizing calories coming from it. The problem is if you just reduce fat, your product is probably going to be too sticky moving through manufacturing lines and the mouthfeel of your product is going to be really poor. That's when we came across this ingredient that's a modified plant fat. Instead of digesting nine calories of fat per gram, you only digest 0.7. This was an ingredient that we really wanted to be able to help steward into the future. And it's also something where the supplier saw that we were really successful in commercializing it. We now own the patents to make this ingredient and we're excited to continue creating new products and innovating with this ingredient as well. Speaker 2: Welcome back to another episode of Chew on This. Today's a special episode brought to you by Aftersell. And we have the president and co-founder of David Protein, which if you haven't heard of it as of right now, you're probably living under a rock. And Zach and I, you know, we've been privileged to have an incredible relationship even before David Protein, and it's an honor to see you here and then spend time with us here, but also it's incredible to see what you've built so far so quickly. I'm sure you hear it all day every day, but for the few viewers, Zach, that maybe don't know you, As of now, give them a little bit about your background. Once again, thank you so much for coming on, but let's jump in with a little bit about your background. Speaker 1: Yeah, well, first off, thank you guys for having me on. Appreciate it. And this is fun for me because Ron, for those who don't know either of us, he was my first mentor in the DTC space back when I started my previous business called Raise. So this is fun to be back on the pod with him sharing the story. Speaker 2: Absolutely. Speaker 1: To your question, a little bit more about my background and how I got to David and what we're doing here. I'm Zach, president and co-founder at David. David designs tools to increase muscle and decrease fat. Our first product is a protein bar with the most protein per calorie of any bar on the market. We launched in September of 2024, have been on the market for about nine months now. And we're really excited about the growth that we've seen, the fit that we feel like our product has seen in the market. And we're excited to continue that growth moving forward with further supply chain scaling to meet demands, new product innovation, furthering distribution and bringing our products to more people across the country. My story started actually with a career in finance where I always thought that I wanted to work as an investor. And out of college, I came to New York to work at an investment firm. Pretty quickly realized I didn't actually like it at all. And during that time, I was getting really interested in health, fitness, food, nutrition, And I ended up leaving that finance role to start a low-carb cookie business that was called Raise. I set up a kitchen out in New Jersey, put up a website on Shopify, found Ron as a mentor and advisor, and started scaling that business up over the course of about a year and a half. We reached a point where we were growing production volumes, outgrowing our kitchen footprint, But really struggling to do all of that in a profitable way when making the cookies by hand in a commercial kitchen. So tried to bring the recipes to a manufacturer with more scale production. And when we did that, found that the recipes were actually physically too sticky to move through the machinery. So, we required a reformulation to really scale. And I went out to investors to try and raise money to do that. But turns out that a small cookie business pitching a full product pivot is not the most attractive venture capital investment. Came out empty handed there. Sucked the business down in June of 2023. But as I was doing that, one of the investors that I pitched my business to said, hey, not interested in investing, but we want to introduce you to our friend Peter. And at the time, Peter Rahal, who is now my co-founder at David, had just had his non-compete agreement expire after selling a brand that he founded in 2012 called RXBAR. And he was interested in getting back into the space after being very successful there and eventually selling his brand to Kellogg. And we met, got connected, got to know each other, and eventually came together to start talking about what became David. And when we started to have those discussions, we really wanted to Dig in from a first principles perspective on what we felt would make the most compelling product. So to answer that, we asked the question, kind of, what brings people to the protein bar category? Why do people eat protein bars? And to us, the answer was pretty clear. People eat bars because they want to increase muscle and decrease body fat. The three most important things in a diet to achieve those goals are one, eat enough protein, two, don't eat too many calories, three, minimize added sugar consumption. So we wanted to create a bar that was objectively the best on all three of those metrics, protein, calories, sugar. And that's what led to the development of David. We started working in September of 2023, spent the next 12 months iterating on hundreds of recipes while also developing the branding, packaging, website, making the first few hires, and opening up for business in September of 2024. Speaker 2: Before we get started, here's a quick thank you to today's sponsor, Aftersell. At Obvi, we recently broke $100 million in sales and I'm going to share one of the mindset shifts that helped us get there. We call it focusing on the transaction moment. It's that point when your customer has their wallet and is ready to buy. Most brands stop right there, but that's actually where the real opportunity begins. We learned this lesson with Aftersell. Since adding their app to our site, we've transformed our checkout experience into a true revenue engine. All while giving customers a more personalized experience they actually appreciate. If you're feeling the squeeze of rising ad costs and customer price sensitivity, Aftersell is the only answer. Now, let's get back to the episode. I think it's time to close the doors here. And you know, you look at it very kind of like, hey, this is the truth and this is what we have to go and do. And I think just utilizing that same mindset and mentality, even how you guys have been built, David, of like, this is exactly what we're trying to solve for. And there's no real gray area. There's no real like, you know, bling and trying to look in different ways. I think that's one of the parts that's like the coolest to see you kind of be able to lead with that strategy. I think one thing I'd love to jump into, Zach, obviously in these nine months of growing, one, you guys have scaled DTC exceptionally well, right? But then also have gotten the ability to go into retail pretty early on. Was this planned? You knew the composition of the product was going to be really strong. You knew it was going to have people saying, oh wow, how is this possible, right? But then in terms of how you were planning to grow, versus how it has grown to probably being one of the fastest growing protein brands in the market, was this exactly planned? And if not, how are you kind of taking what's come at you and said, all right, well, this is how we have to pivot into the larger amount of growth? Speaker 1: The trajectory overall has definitely been faster than expected in a positive way, which is awesome to see. But the general plan of start DTC and then move into retail is what we envisioned from the beginning, though that pull into retail and the velocity of retail has been faster than expected. So we thought when we launched that we would start moving into retail probably around right now, nine months or so after we launched. We ended up getting pulled into retail. Within three months of launching, which was great. It was exactly what we want to see as a business with Great retailers and partners now like the Vitamin Shoppe Nationwide coming to us and saying, hey, we think there's real opportunity to bring your bar to more people quicker than maybe you thought. And seeing the velocities that we are at in those stores now has really validated those efforts. But the original vision was, let's start direct to consumer. Let's build that connection with the customer. Let's get product feedback and make sure that what we think was great that we created was actually as great as we thought or learn that maybe it wasn't and that we needed to make some tweaks. And third, really build awareness so that when we get into retail, velocities are strong. Because once you get into a store, you kind of have one chance. And if you go in and you blow it, you may not get that again. So, DTC is a great way for us to build that awareness so that when people see us on the shelf, they know to pick us up. Unknown Speaker: I love that. Speaker 3: One question for you because it's something that we also faced when we entered retail and It was that I would say like maybe when we were fully stocked on the shelves and people were realizing, oh, you can get Avi at Walmart, right? The community was buzzing. Our website was like, oh, go shop at Walmart, you know, emails, SMS, everything. I don't think we understood the impact it would actually have on DTC, right? DTC being our bread and butter, we know how to market. We know how to use Facebook to obviously get customers and build the brand awareness that you're talking about, right? But if the conversion drops on DTC because people now realize they can get your product cheaper elsewhere, then your source of demand gen kind of comes to a halt, right? So I'm very curious what you guys were able to do to maintain this awareness factor and driving awareness just through DTC without actually Affecting maybe the margins and maybe losing a little bit because that's what we ended up seeing. We saw a drop in conversion rate. We weren't able to profitably spend. How do you strike a balance between both DTC and retail? Speaker 1: Yeah, it's a really important question to make sure that our channels align well with each other. And one thing that we wanted to be really deliberate about from the beginning was what we call our pricing slopes. And what that means is, specifically like within retail, making sure that If we know that in the long run, Costco is going to require us on the shelf at a certain price, and we know that Walmart is going to require us on the shelf at a certain price, that we need to start with our pricing in a certain way to grocery. That allows for the ability to price Costco, Walmart, Target in certain ways long term. And I think that mindset also extended to how we think about margins across direct-to-consumer and retail. So I think one like kind of beautiful way that we design things and like credit to our awesome finance team for doing this, but we don't really care whether you make a purchase in grocery, in Walmart, We're on Amazon or on our website. We make the same margin percentage in all places. So whether you convert directly on our website or you go buy in the store, all of it's positive for us and I really don't care which one you do. So because of that, we're less concerned about where the conversion happens and just trying to I get consumers to understand the value that the product can bring them and that they're converting somewhere. Speaker 3: So how are you actually tracking this? Because at least with like, at least for us, right, we don't necessarily get like live, live to date, you know, on an hourly basis of what's happening in retail. Whereas like on DTC, I have my triple well up every hour seeing how the previous hour did, right? So how would you advise brands to actually Look at both holistically and then make decisions versus just looking at one in a silo. Speaker 1: Yeah, so we think about our marketing spend in sort of two buckets. One is the direct response performance marketing. And on that, we can really say we'll continue to spend so long as a customer is bringing us, as an example, First order profitability on every order. And so long as that's happening, we're happy to keep spending and it's actually bringing us more cash flow on day one to acquire that customer. So we should keep doing it and keep spending. And there's probably also a bunch of awareness that's being generated from that marketing spend that's converting outside of Our direct-to-consumer channel that's providing kind of gravy on top of that. Then, you know, the question would be, well, could we actually be spending more? Because we know that there's probably some leakage into retail and people are seeing us online, not converting on our website, but converting in the store. And that's where we kind of have these internal debates of how do we actually measure that? Or how do we try to approximate that? We don't have a perfect answer for that yet, and we're working on whether there are better ways to measure this. One proxy that we've discussed, for example, is if we know that 80% of our revenue is direct to consumer and 20% is retail, Putting a 20% buffer on top of that first-order profitability threshold and being willing to spend instead of, you know, $10 to acquire a customer, we're willing to spend $12 because 20% of our revenue is coming outside of direct consumer, and we just know that that awareness is driving into that. That's kind of a crude method, but I think When you depart from the measurability of direct response, direct-to-consumer advertising, you have to be okay with some of these uncertainties in order to kind of build your brand and support those velocities and sort of trusting that marketing works if you're doing it well. And then We also tend to think of the marketing spend that is driving to our website with things like meta ads, newsletters. Tick tock app loving those channels more as let's replies those or let's let's use those and really keep our like thresholds of first order profitability more strict and then that buffer of spend we put into more top of funnel things like podcasts or TV YouTube out of home and that's where we kind of bring that buffer of awareness that flows into retail so we're starting to air more towards that second line of thinking where. Performance marketing is to drive direct-to-consumer. It should pay for itself. There's going to be some extra benefits of it, but we don't know what they are, so we're not going to count on them too much. And then for what we believe is driving to retail of out-of-home and top-of-funnel, that's where we invest more in that brand marketing for long-term awareness. Speaker 2: It's incredible. Super tactical. Thank you for that, Zach. One thing I also want to touch on is the, you know, a brand that's only nine months old, the amount of different places that you guys are running media already, right? Part of it, of course, helps that, you know, you guys have some money to spend, but even beyond that, right, coming out of the gate with some really incredible influencers, whether it was a You know, Peter Atiyah, you have Huberman, you have some really, really great spokespeople. Then you also, you know, started to do out-of-home advertising very quickly. And then you also have, pretty much, you're on every media channel, right, and spending. Has there been something that you can share that's been working surprisingly well where, you know, most of these platforms, they're doing what they're supposed to do, but then there are some, they're like, wait, I did not expect that. Anything you can share, especially for, you know, we have a large cohort of food and beverage brands that watch the show, would love to know if there's something that's, hey, you should definitely go check out or go do this. Speaker 1: The podcast channel has been really fruitful for us. I think that it's a great place to find people where you can really niche down into your biggest areas of interest by audience and you can sort of get targeted in a not sophisticated digital marketing targeted type of way. So it combines a little bit of the positives of Digital marketing targeting with some of the other positives of more like top of funnel, brand awareness, brand credibility and what we've really found or what we strongly believe that honestly I don't have too much to actually say as evidence here but I think there's enough correlation to really support it is that Podcast and YouTube creators and newsletters, those types of endorsements provide a really strong halo effect to make your performance marketing work even better. So we found that not only does podcast or YouTube pay for itself in terms of the ROI that we see from advertising on, for example, the Huberman Lab podcast, It also makes our meta ads more efficient. So that's been an awesome channel for us. And I would really encourage people, even with smaller budgets, to start with saying, you know, if you're creating a product to address a problem in your life, Think about, you know, who did you listen to that's influential to you that maybe you think other people who are a similar consumer to you who may be interested in your product also listen to and see if you can find ways to start sponsoring podcasts, newsletters, YouTube creators that can fit into the niches that you're playing into. And then when that person who is interested, for example, in a protein bar is Scrolling through their Facebook feed, and they've heard of David from the Huberman Lab podcast or from a YouTube creator that they watch. When they see it on their Facebook feed, they know that it's a real company, that it's a trusted product, and it just, I think, really boosts that conversion on that type of advertising. So, big fan of, like, kind of credibility boosting advertising in that way. One other thing that we've put probably more money into than companies of our age is advertising out of home, particularly with trucks. Shout out to Brian Hands from Crosswalk, who helps us out with that. We have a bunch of trucks roaming the streets of New York and have plans to expand that advertising area as well. Overall, the CPMs are really attractive compared to other out-of-home advertising like billboards. And I think they also provide some sort of credibility boosting where a lot of people think that they're actually trucks full of David. of New York dropping off to stores, which kind of makes me feel like a big brand, which makes people think that A lot of people want your product. Speaker 2: Quick break to say thank you to today's sponsor, Aftersell. Let's talk about control in e-commerce because here's the truth. We spend countless hours mastering marketing platforms we don't own or control. One algorithm change or one policy update and everything gets turned upside down. That's why we started to focus on something we actually have control over and that's our checkout experience. With Aftersell, we've built a conversion engine that's immune to platform changes. We're capturing more value from every visitor regardless of what's happening with Meta or Google. Our average order value went up by 15%. On top of that, with optimized post-purchase offers, we're earning even an extra 50 cents per order with rock banks. And on top of all of this, We're seeing better conversion rates, even with higher cart values. Let that sink in. Stop pouring all your energy into external platforms and start maximizing what you actually own. Try Aftersell free for 60 days. It's time to take control of your growth. Now, let's get back to the episode. Speaker 3: I have a question on the podcast integration and maybe YouTube. What does that integration actually look like? Because there's a few ways to do it, right? You may have a pre-roll, a mid-roll, end-roll, or is it quite literally sponsoring the podcast and they have David everywhere, they're talking about the product throughout the episode? Just from my experience, the different integrations actually provide way different results altogether, right? If it's just like a straight-up mid-roll ad, it's like, hey, go shop David right now. Not much to it, right? It's just like awareness and that will probably never convert. But what is the integration that people should be working towards and that actually has effectiveness? Speaker 1: Yeah, we have tested Two main types of podcast sponsorships. One is the cut-in ad role read that is not host read. So that's, for example, if, you know, right now I snapped my fingers and the podcast stopped and it started saying, David Protein, the highest protein to calorie ratio bar on the market. Find it at stores across New York City. Speaker 2: We're going to charge you for that. Speaker 1: Highest protein to calorie ratio on the market. DavidProtein.com. And then the second is the sponsor Red Integrated into the podcast where I you know let's say I after I finish talking now run you pick up a bar and you say. And by the way, guys, I always keep these on me through my podcasts. This is a David Bar. It's got 28 grams of protein, only 150 calories, zero grams of sugar. I highly recommend that you guys check them out and try them. They've been awesome for me. That second style is what we've really found works way better than the first. The CPMs on the first style are way cheaper. And you can kind of record an ad once and spray it across a bunch of different podcasts. But we've stopped doing that. We found that just there's not a real return there. And we found that the credibility of a host-read sponsorship is really what drives conversion and trust in the consumer. And I think also has that halo effect on other advertising that I mentioned earlier. Speaker 3: Do you guys brief that out at all or you just let the host do their thing? Speaker 1: We typically brief it out with some high-level bullets of what our product is differentiated on, but we really encourage people to make it their own. And you'll see, for example, on the Huberman Lab podcast, Andrew Huberman will talk about how he's a big proponent of getting one gram of protein per pound of body weight. Every day, and he likes to have one to two Davids a day to help him get to that goal. And that protein is important for increasing muscle and keeping you satiated to help you not overeat on calories and maintain your body composition. And then on the other end of the spectrum, the canceled podcast, which is kind of more like fun, two women talking about anything from gossip to pop culture, talking about how David is the best four inches they've ever had. Speaker 3: I do want to go back to maybe some of the DTC side because the one thing that you mentioned is maintaining first order profitability allows you to be able to start investing in some of these other channels like podcast and YouTube and seeing this halo effect across the board, right? First order profitability is not easy, right, for a lot of brands. I think there's a couple things that go into it. One, obviously, is the product has to be amazing and you guys obviously have that, right? Two, I believe, you know, creative is very important. Three, the landing page, right, the offer, right, what that looks like and making sure that you do have a high enough AOV to be able to scale into, right? These days, month after month, year over year, CAC in general is just gonna go up, right? More competition, more ad dollars in the auction, et cetera, et cetera. The one thing that we can control is maximizing AOV, right? So, would love for you to kind of get into some of the strategies that you guys have leveraged at David to increase AOV and maintain first order profitability. Speaker 1: Yeah, so we have this really interesting debate internally often about. I and trial incentivizing with customers so. And we think about it a little bit differently based off of the life cycle that we're in. So when we first launched, we actually didn't pay attention at all to AOV really, because we even offered a four bar sample pack that was $19. And that four bar sample pack was not super profitable. You know, we're shipping, we're paying $10 to ship a product and we obviously have costs of production and the consumer's only paying $19 for that. So that doesn't really leave you much room to acquire a customer if you're spending on paid marketing. But our bet was that the product would Get people to come back multiple times. And as we have grown and as more of our customer base shifts to returning from new, then the focus does become a little bit more on AOV. One thing that we try to do at David is to give people a reason To purchase more in terms of more value to them, if more value to us. So effectively, like, share the value that's created by leveraging shipping costs. So if we can ship an order that's $150 and it only costs us, you know, three more dollars to ship that order than one that's only $40, then we can share some of that value of spreading fixed costs across a larger order with the consumer. And the way that we share that value with the consumer is one, free shipping on orders of two cartons or more. Two, a gift with purchase on orders of three cartons or more. So that can be something like David merch, a hat, socks. It could be a small sample pack of our newest flavor that we just launched that you probably haven't tried yet. Unknown Speaker: And. Speaker 1: Fourth is buying four cartons, we will let you choose a fifth carton for free. We found that one in particular is the most effective at driving AOV. So, we have a really high uptake on the buy four, get one. Speaker 2: Super smart. You know, I want to touch on one part of the news that's been circulating, right, which is $725 million valuation is probably not even the biggest news. But the fact that you guys went and bought an entire factory or the ingredient supplier, give us a little bit of color there. There are comments from, you know, power move to like, this is incredible. And, you know, it'd be amazing to understand, like, How you guys got to even thinking that and what goes into being able to actually go and make that happen? Speaker 1: When we thought about creating David with the goals of increasing muscle and decreasing fat and prioritizing protein while minimizing other calories, it really boils down to There are three macronutrients, protein, fat, carbohydrates. We want to maximize the protein. We want to minimize the fats, minimize the carbohydrates. There are plenty of tools out there to minimize calories coming from carbohydrates. There's kind of a large industry of food ingredients around sugar reduction, fiber instead of sugar to help bulk and bind bars, high intensity sweeteners instead of sugar to help sweeten them. So we're super deliberate about all of those pieces. You know, just like any other bar would seek to do, that is kind of touting their low sugar, high protein intake. One thing that really differentiates how we approached product formulation was that bucket of fat. So, fat is the most calorically dense macronutrient. Fat has nine calories per gram compared to protein at four calories per gram and carbohydrates at four calories per gram as well. So, reducing fat is super essential in trying to reduce caloric load and maximizing calories coming from protein. The problem is if you just reduce that, you one, are not machinable. So it means that your product is probably going to be too sticky moving through manufacturing lines, which is a big problem that I am very familiar with. And two, it means that the mouthfeel of your product is going to be really poor. It's going to feel dense, dry, chewy, and really unattractive and unpalatable. So Then our minds go to, is there a way to achieve the mouthfeel, texture, and production benefits of fat without the calories? And that's when we came across this ingredient that's a modified plant fat where they take a standard triglyceride, a standard fat, and they effectively insert A molecule between the chains of fatty acids and the backbone of the fat that prevents your stomach enzymes from topping off the chains of energy from the triglycerides. And instead of digesting nine calories of fat per gram, you only digest 0.7. And it's really game changing. And it's an amazing ingredient. It is sort of how, you know, high-intensity sweeteners like Stevia, monk fruit, sucralose have helped millions of people enjoy food and lose weight while still having the taste of sugar but without the calories. We feel like this ingredient is going to do that with fat. It's going to help millions of people effortlessly eat the foods that they want to eat without having to compromise. Anything sensory, enjoying their food, but not getting the calories. So we got really excited about this ingredient. We commercialized it in our bars. And as we've grown, we've seen that the market has really enjoyed this concept of high protein, low calorie. And that this was an ingredient that we really wanted to be able to help steward into the future. And it's also something where the supplier saw that we were really successful in commercializing it. And they came to us and they said, hey guys, We have this patented process that we've had for 10 years now plus. No one has commercialized it as successfully as you guys have. We think we could be stronger together than separate. What do you think of talking about acquisition discussions? And we said, yes, that sounds like a great idea. We got into things and a few months later, we had closed on a fundraise that partially helped fund the acquisition and partially put some growth capital onto our balance sheet. Brought them into the David fold. We now own the patents to make this ingredient. So, we are the only supplier of the ingredient. We're working to scale up the supply chain so that. We will not face constraints. Right now, the reason we're not making more bars than we are right now is because we're constrained on this ingredient. But we're going to be putting significant capital behind increasing production levels. And we're excited to continue creating new products and innovating with this ingredient as well. Speaker 2: I think it's insane. I think one thing that you started this convo with, which was really, really powerful, was you said we're on this mission to solve things and our first product is the David Protein Bar, right? And I think that's a really nice nod to the fact that I think a lot of brands become their product versus like, Going after the brand and taking a mission that you have and then realizing, hey, this is a product towards that mission. Obviously, also hinting at the fact that the roadmap is going to be pretty expansive. What excites you? I know you can't share things that are in the pipeline, but what excites you with the ability to now have the ability to do a lot of different things, how do you also manage excitement but distraction? Because you can now literally in some ways in the bubble of the world you guys are in, almost conquer a world. But it also means you have to be equally careful and equally methodical in making sure that you don't overstep and grow properly. So how do you think of this piece? Because I feel like part of it can sometimes feel euphoric. And I know you guys are very level-headed, but you can feel euphoric and like, hey, I can do it all now. Speaker 1: Yeah, it's really important to be deliberate about our roadmap and Right now, the biggest constraint is human capital. So we are really working to bolster our team, bolster the knowledge in our R&D department to give us the capacity to put more mindshare to more innovation. That's what a lot of our focus is on today. And The way we think about it is anything that has a lot of fat and a lot of sugar we can make a really great tasting version of that's much better for you. And much lower calorie. So that's what excites us. Speaker 2: That's awesome. I love that. That's really cool. Speaker 3: No, this was incredible. I mean, just the story, how the brand even started to where you guys are at, like nine months later, as well as like the tactical piece too, right? Just on how you guys are thinking about marketing. It's been very inspirational. So thank you. Thank you for that. Just to wrap up here, would love one final takeaway from you for the viewers and listeners. One thing to take back and implement in their business starting today, what would that one thing be? Speaker 1: The one thing that I think about by far the most at David is our product. So if marketing is not working for some reason or the finances aren't falling into place, the first place that I always look is, so can we make our product better? And what about our product is not resonating with the consumer? What is not differentiated to them? So for us at David, from the very beginning, it was so Create a product that people are going to say, thank goodness this is finally here. Speaker 3: Love that. Speaker 2: Chew on that, literally. Speaker 3: If you want more from us, follow us on Twitter, follow us on Instagram, follow us on TikTok, and check out the website ChewOnThis.io.