Interview with Jeff Engel, CEO of Snacktops, About Building a Consumer Goods Company
In this interview with Jeff Engel, the CEO of Snacktops, we discuss how they continues to make progress winning new customers for the innovative snack containers that conveniently fit on top of beverage containers. Their tag line is ‘Carry Moore – Sell More’. Jeff has been the CEO of Snacktops for two and a half years. Prior to Snacktops, Jeff spent 10 years as the senior VP at Daymon Interactions. Jeff was also in the United States Navy for nine years, seven of which is served as a Navy Seal.
Patrick: This is Patrick Henry, the CEO of QuestFusion, with The Real Deal…What Matters. I’m here today with Jeff Engel. Jeff is the CEO of a very cool company called Snacktops. He’s been the CEO for two-and-a-half years and continues to make progress winning new customers for the innovative snack containers that conveniently fit on top of beverage containers.
Their tagline is, “Carry more, sell more.” This is targeted at their key audience of people who sell snack and beverages at various different venues. Prior to Snacktops, Jeff spent 10 years as the senior vice president at Daymon Interactions. He was also in the United States Navy for nine years, seven years of which he served as a Navy SEAL. He’s kind of a badass. Thank you for your service, Jeff. Welcome to the program.
Jeff: Thank you. It’s great to be here.
Patrick: Tell us more about yourself and how you got involved with Snacktops.
Jeff: I had been at Daymon Interactions for about 10 years. Daymon was all about consumer engagement. How do you get a consumer to buy one more item? We worked with retailers in any place that was trying to sell a product to a consumer.
I was approached by the founder and investors to join Snacktops about two-and-a-half years ago. To me, it was an intuitive product. I had always been focused on the path of purchase. How do you get one more item into the shopping cart? Once a person went to the register, you were done. We were excited. We were high-fiving each other.
As soon as I saw Snacktops, I realized that we don’t think about the journey that the consumer has to go through afterwards. We think about giving them a bag. They have two hands. They just carry their items out. Is that really the most convenient way to do it? Everyone had talked about the path to purchase for the last 5 to 10 years, but no one has talked about the path to consumption. Everyone says, “The path to purchase includes that.” But does it really?
I realized that they were missing the mark. I recognized that Snacktops were hitting that mark. At convenience stores, which is one of our target audiences, the average ring is less than three items. Why? I don’t know for sure, but I think it’s because people can only carry so much.
At Daymon, I was trying to get them to put one more item in their shopping cart. At Snacktops, I want to get one more item in their hands. That’s why we say with our tagline that, if you can get them to carry more, they’re going to buy more. That’s where the “aha” moment came. I said, “I think this thing works.”
Once I joined the company, we did some work at Yankee Stadium. A lot of people have good ideas, but until you see the market, you don’t know. We were at Yankee Stadium for 10 games and we had great results. Thirty-one percent bought an incremental food or beverage item. That’s a lot. Ninety-seven percent said they wanted to see it again. Eighty-five percent said they wanted to see it at other venues.
I was more interested in the 15% that didn’t want to see it. We asked if they wanted to see it at airports, convenience stores, quick-serve restaurants or other stadiums and arenas. One of the feedback responses was, “I don’t know how to carry this on the airplane because I don’t know how to put it in my luggage.”
We realized that the first round of product that we produced for Yankee Stadium was so durable, even though it was disposable, that people thought they were supposed to hold onto it. They thought it was a reusable item. It’s a 100% recyclable piece of material. We learned that, yes, the market wanted it. They wanted to see it other places.
We knew we could do the product better. Yankee Stadium validated my assumption that it was good. At that point, I knew we were on to something. I also knew that the product wasn’t quite right. We needed to do some adjustments. We spent the next year working on the product to make it more user friendly and function better in someone’s hand when it was loaded with food and drinks. That’s what brought me to all of this. I realized that we had not thought about the path to consumption.
Patrick: Has the business model changed over time? Is it the same focus customers and markets?
Jeff: It has absolutely changed. As an entrepreneur, we’re lucky that we have the opportunity that we’re not a giant ship trying to turn in the middle of the night. We’re a little speedboat. Because of that, we’re able to adjust. We were focusing 100% on stadiums.
We were also doing movie theaters and quick-serve restaurants. There are about seven different segments that we fit in to. We realized that it was a lot of work to sell to stadiums. Everyone wants to get big commercial items. You have big sponsors at stadiums like Coke, Pepsi, Budweiser and Mastercard.
These big companies dictate what goes on in the stadiums. You get second fiddle. If you’re not putting in sponsor dollars, you’re not going to get a big play. For us, a good order at a stadium is only a couple hundred units. A typical case count is about 500. We’re only selling about three to four cases per stadium.
Patrick: It’s hard to make a business on that
Jeff: It’s really hard. I was on a show not too long ago and someone said, “You have to go after the Yankees.” I said, “I can’t afford to go after the Yankees.” I’d love to have them as a marquee customer. I’m a big Derek Jeter fan, but I can’t afford to do it. The good thing was that the stadiums validated that we were on to something. At the same time, we were fortunate enough that we didn’t just focus on stadiums. We were going after other venues and places where concession stands were set up. Where was the most pain, that was quantifiable, that we could solve for?
Patrick: Can you explain who your target customer is now and the unique value proposition?
Jeff: Let me explain the product itself. This is the product.
Patrick: This is one example. You have multiple versions of these, right?
Jeff: You can hold your drink in the bottom and your food on top. We have our solution to fit on top of fountain drinks. We also have our solution to fit on top of hot drinks. This could be a muffin container. You could also put a sandwich on top. We have all of these different sizes.
Our portfolio is set up that we go to a customer and say, “Don’t just look at this package and tell me you can fit a croissant in there.” No. Tell me what kind of food and beverage you want to pair. Who is your target audience? Why are you targeting them? Then let’s put a solution together. We’ve set up our patent portfolio. We have over 80 patents right now. A lot of time was spent on patents before it even came to market.
Patrick: Those are all issued patents?
Jeff: Over half have been issued.
Patrick: For a small company, that’s a huge amount of patents.
Jeff: The incredible thing is, we’ve only had one rejected patent to date. The gentleman who did the original patents did a lot of work. He spent four years at his coffee table doing this thing. He did his homework and was smart about it. We can do it on top of hot drinks or cold drinks. They will also fit on top of cans and bottles. We can do a lot of things.
Patrick: You switched away from stadiums. Who are your primary target customers right now? You have intellectual property. That’s great so that you have some defensibility. You can carry more stuff.
Jeff: If a stadium calls up and wants to do something, we have an inventory. We have that ability. We’re also doing work with family entertainment centers. People know them more as boomers or music parks. We’re also doing work with convenience stores, which is a big channel for us. There are 154,000 convenience stores in the United States. There are over 50,000 in Japan. For each one of the markets, we do a bit of a different solution. We identify what they’re doing. The other market that we’re going after right now is quick-serve restaurants, or QSR. That would be like McDonald’s and Starbucks. These businesses often require slightly different financial expertise to many other restaurants, which is why many of them make use of specialist qsr analytics for their accounting needs.
Patrick: Many of those are in airports as well, right?
Jeff: Correct. You’ll start seeing us in airports in May. When you look at QSR, they are worried about price. We give our customers a competitive advantage so that they don’t have to compete on price. We’re helping them grow revenue as opposed to trying to grow margin.
Patrick: How big is the market for this?
Jeff: Semites I forget how big it really is. The market is where we know our patents are defensible. Globally, it’s two billion. In the US alone, it’s 700 million.
Patrick: That’s two billion globally annually.
Patrick: It’s a massive market opportunity. Do you have much competition in this area?
Jeff: We have some, yes. Our real advantage is, because of the way we designed this, we set up a patent portfolio of so many patents with 30-plus different solutions that are all customizable. We have lots of different solutions, where our competitors are coming in with one or two solutions, and that’s it.
If you want to buy a Model T, you can have any color you want, as long as it’s black. That’s what our competitors have done. They’ve come up with a good solution that solves a problem, but you have to buy that particular solution.
When we go into QSRs, I say, “Stop looking at what we have. Let’s talk about your path to consumption and your consumer. What are they buying? Are you trying to increase beverage sales? Are you trying to increase food items? Let’s narrow it down. What’s working? What’s growing? What’s declining? Let’s not put a declining food or beverage item on there. Let’s go towards ramp up. We’ll set the cost of what you want for the total solution to margin. Then let’s build the solution back in.”
While we’re not the total package cost, we’re a portion of that. As you look at the total cost of ownership, then you can get a solution that helps you to grow. Depending on the customer and headcount, it might grow margin. Some customers were growing 70% margin. Others were growing almost 3% total revenue.
Others are looking at other counts. We’re doubling you over your sales. We focus on what’s important to the customer and what they’re trying to do. What are the metrics for success? This is not only as a corporation, but personally. Then we focus back on that.
Patrick: Those are great metrics. Do you have a big enough sample size of customers where you feel, “This is what the monthly recurring revenue looks like?” This is the percentage increase and volume that you sell. Do you have it across enough customers that you feel like you can quantify it or are they data points right now?
Jeff: In Q4, we transitioned from data points that validated what my gut was saying to real-world examples. The piece that was most interesting to me is that I now have customers who are saying, “Please don’t talk about this to anyone.” We are in a non-disclosure.
Patrick: You mean about the specific things you are doing with them?
Jeff: Yes. It’s to the point where they’ve asked me not to take meetings with other people, knowing that they can’t do that. They moan and groan because they recognize that they’re on to something. From a corporation and personal standpoint, it breaks up the market. One of the things that I learned early on is that there are early adopters. If you try and sell to the early majority or late majority, you’re never going to get them over the line.
I have one customer who is a great guy. It is a great company. I recognize that they will be a late majority at best. I need to keep them warm and engaged. I need to go with the other success stories because he doesn’t have the risk tolerance to do something now at this point. Their company is doing okay. Would 3% revenue help them? Absolutely.
The risk for them, if they do something that hurts the brand, will be damaging. Some of the other companies are rewarded for taking risks. They look at the metrics and data. They know they can grow revenue. They do the tests. The results are always better than I expect them to be. One customer was expecting X. I was thinking it was going to be 1 ½ X and it was 3X.
Patrick: This is in terms of increase in the amount of stuff that they’re selling?
Jeff: It was number of units. That was X. This is even bigger than I realized as a benefit to the customer.
Patrick: You have customers. You have revenue. Do you have a quick path to profitability?
Jeff: Yes. At the end of 2018, we’ll be profitable.
Patrick: That’s with pretty aggressive expansive plans? What are your underlying assumptions associated with that? Are you totally focused on the US market? Do you think you’ll have global expansion baked into that?
Jeff: Yes to all of those. We have activities going on in Asia. We have activities going on in Australia. We have activities here in the US. If we pull through just what we have in our pipeline now, we’re fine. We’ll be profitable by the end of 2018.
Patrick: Terrific. What’s an exit strategy? Is it something you sell to a bigger packaging company? Is it something you plan to take public over time? Have you thought that far ahead?
Jeff: We’ll get picked up by a packaging company most likely. We could also get picked up by a Mondelez or one of the other snack companies that are looking to do something different. There are also private equity companies. It’s an interesting time in the food and beverage space.
You have all of these small companies being gobbled up by bigger companies. You also have private equity companies coming in and capturing QSRs.
There was a deal that was just announced between Keurig and Snapple. I think Keurig is interested in the deal. It started out as reasonable one-time things. The founder, unfortunately, only made $50,000 on that thing. He ended up selling out at $50,000. The lesson that I learned is, if you believe in it, you need to have the tenacity to stick it out. You need to have the courage.
Someone asked me the other day, “What is the thing that helps you as an entrepreneur?” It’s about managing the fear or acknowledging the fear that you may have. That’s in life in general. If you acknowledge it, you can address it and overcome it. When I’m exceling at what I’m doing, it’s when I’m able to remove the fear in my life, and those barriers.
I learned that in the Navy. I really learned it as a kid and honed it in the Navy. I’m at my best at work when I’m able to contain the fear, look at it, address it and recognize that it’s not going to kill me. I move on and it’s okay. Don’t be afraid to fail. You’re going to fail. You just get back up. What did you learn from it?
Patrick: That’s a big one. Do you have any other major lessons for the entrepreneurial community and things you’ve learned over the last two-and-a-half years of running a company?
Jeff: We talked about fear. Let’s talk a little bit about tenacity. When you get kicked, get back up.
Patrick: You have to grind things out.
Jeff: You have to admit when you’re wrong and pivot. I don’t know if “pivot” is the right word. That sounds like you’re making a big change. Sometimes you have to acknowledge that your initial assumptions were wrong. Keep looking at the validation points. You mentioned this earlier. Are you looking at points that tell you you’re going in the right direction or do you have real points that get you there? You need to make sure you’re not just getting data points to validate your assumptions.
Patrick: It’s the confirmation bias versus being open minded and learning new things.
Jeff: Right. You keep progressing. I have really good experience in consumer engagement in brick and mortar. I can walk into a store, quick-serve restaurant or retail store. I can instantly tell what to spot because I’ve been doing it long enough. I realized that my digital side was not as good as it could be. As an entrepreneur, I have some options.
I could pay someone a bunch of money, which I don’t have, or I can take classes at night. I took classes at the University of Illinois Urbana. I figured out digital marketing and got better at it. Digital is just another place where people hang out, just like brick and mortar. It’s not any different. I think younger kids recognize this even more. You look at kids with virtual reality. They flow in and out much easier than myself, who is a little more mature.
Once you realize that it’s just the medium you’re in, that’s it. I thought for a long time about Facebook, “Why get involved with it?” But it’s a channel to communicate. I’m not a big Facebook user. I’m more on LinkedIn because it’s a business channel. It’s a way to communicate. It helps your ideas. It’s also a way to give back.
I use it as a vehicle to help support veterans and military. I’m part of a group called The Honor Foundation. It helps other people understand what’s important to me, and I can also listen to what’s important to others, and what you can do for their goals.
Patrick: This has been terrific. I’m here with Jeff Engel, the CEO of Snacktops. How can people reach you, Jeff?
Jeff: The best way is through the Snacktops website or directly via email, which is email@example.com.
This is Patrick Henry, the CEO of QuestFusion, with the Real Deal…What Matters.