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Interview

Inside the World of DTC M&A, with Ryan Lewendon, Partner at Giannuzzi Lewendon, LLP

For many innovators in digital commerce, the dream is building a brand from scratch that grows to a scale where some larger company wants to pay a LOT of money for it. Then, you buy an island. These days the path to that dream is a bit more rocky and more complex, but with the right fundamentals in place, a vibrant DTC brand can still drive a lot of value. Like in Coca Cola’s 5.6 billion dollar acquisition of BodyArmor sports drinks late in 2021. Ryan Lewendon, Partner at law firm Giannuzzi LewENdon LLC, helped negotiate that deal but also worked with body armor and tons of other D2C companies throughout their lifecycle. Ryan joined Rob and Peter to lay out the necessary elements for a DTC growth path that will return maximum, and lasting, value.

Transcript:

Peter Crosby:
Welcome to Unpacking the Digital Shelf, where we explore brand manufacturing in the digital age.

Peter Crosby:
Hey everyone, Peter Crosby here from the Digital Shelf Institute. For many innovators in digital commerce, the dream is building a brand from scratch that grows to a scale where some larger company wants to pay a lot of money for it. Then you buy an island. Maybe that's just me. But these days, the path to that dream is a bit more rocky and more complex. But with the right fundamentals in place, a vibrant D2C brand can still drive a lot of value, like in Coca-Cola's $5.6 billion acquisition of Body Armor sports drinks in late 2021. Ryan Lewendon, partner at law firm Giannuzzi Lewendon LLC helped negotiate that deal, but also worked with Body Armor and tons of other D2C companies throughout their life cycle. Ryan joined Rob and me to lay out the necessary elements for a D2C growth path that will return maximum and lasting value.

Peter Crosby:
Ryan, thank you so much for joining us on the podcast. Rob and I have been really looking forward to talking to you about your space. It's exciting.

Ryan Lewendon:
Yeah. Peter, Rob, thanks for having me. I'm really pumped to be here.

Peter Crosby:
You and your firm have been central advisors in the life cycle of some of the most compelling D2C CPG brands in the industry. It's like RXBAR, Oatly, Vita Coco. And late last year, you represented Body Armor sports drink in its sale to Coke for $5.6 billion, which is the largest acquisition Coke has completed in its 130 years of doing business. And that's after having sold them Vitamin Water for 4 billion way back in the early days of D2C, like 2007. So, you've been around this realm for a while. Can you start by giving us an outline of the kind of work that you do for your clients?

Ryan Lewendon:
Yeah. Yeah, absolutely. So my firm, Giannuzzi Lewendon, we're an inch wide and a mile deep. All we do is work with fast growing, disruptive consumer products brands, and that's all we focus on. And we're kind of the only life cycle council out there, in that we can work with you really early on in sort of your life cycle, and we can take you every single step of the way through an exit for hopefully billions and billions of dollars, like a Body Armor or a Vita Coco or a RXBAR or an [inaudible 00:02:35]. So, basically what we do, it kind of breaks down into four pillars. The first is financing and M&A. I think in this sort of niche world, we do more of it than anybody else out there.

Ryan Lewendon:
We sell about 20 companies a year. We've averaged about two to two and a half billion in exit value the past five years, except [inaudible 00:03:00], because of the body armor deal, we were north of 10 billion in exit value. We do about a hundred to 200 rounds of financing a year. And that sort of... That runs the gamut, right? In terms of life cycle council, that runs the gamut from a hundred million rounds of financing, multi hundred million rounds of financing, all the way down to a million dollar, half a million dollar seed round. And what sort of makes us unique in that representation is, on the earlier side, you're getting council that sort of has a great downstream view into what you're doing, right? Hey, this is what you need to do now to get your money in, to get your investors in, but these are the additional things that you need to put in place to set yourself up for success in the future, for the future rounds, and then the exit.

Ryan Lewendon:
We definitely preach, look, your exit is the ultimate goal, right? So, that's the war you're fighting. That's what you're getting up out of bed every day to go to battle, right? That's my IPO and my exit. And these rounds of financing are the sort of intermittent battles that you have to fight along the way. And we're very, very much adept because we're true life cycle sort of advisors for these companies of setting you up not to win the battle but lose the war for a number of reasons. You get the wrong investor and you get the wrong sort of dynamics between people, you set yourself up at evaluation that you can't overcome in the success of rounds.

Ryan Lewendon:
So, we're really good advisors on a legal side and sort of from an experience side, in terms of life cycle, how to set yourself up at the sort of your C round, your A round, your B round, your C round for success in those next steps along the way towards sort of unlocking value. And on the later stage, on the latter side of things, we're a great value to the company because we've got this great contextual basis for the industry, right? We know what the proclivities are. We know what sort of things are real issues in CPG, and what sort of might not be as much, but might be an issue in tech, right? We know how to devise those things. And we know sort of, when we're going into your company, when you're setting yourself up for that sale, we know the things that acquirers are going to want and ask for, and we know how to clean that up and put that in a way that sort of is going to make your company just look like a really, really great asset for acquisition.

Ryan Lewendon:
So then the second vertical is basically, you raise money from investors to execute on your plan, and then you have to spend it to execute that plan. We help you do everything associated with spending that money, right? Everything from, on a contractual basis, from building out your infrastructure, to building your human capital, to securing your IP, to celebrity partnerships, to agreements with distributors, to agreements with brokers, to agreements with your digital marketers, to your truck wraps, to your commercial leases. Everything from a contractual basis that you need to do to build your company and scale it, we help you do. But kind of like we do with the financing, we help you do two things, right?

Ryan Lewendon:
We help you solve the problem right in front of you, right? How do you get that business transaction done? How do you get to yes? How do you get the agreement done? But we also know all the things to put in place in that particular sort of deal. Hey, what things do I need to do as a business owner to set this agreement up, to set this relationship up, so that when a sophisticated investor comes in, or when an acquirer comes in, this is a benefit to that person, they perceive it as a benefit and not a detriment? And in terms of sort of life cycle, we're very ambidextrous, right? You find most lawyers kind of...

Ryan Lewendon:
They're really good at thinking one way. You're either kind of like a startup lawyer with small clients and you don't have a lot of leverage, and you need to help them get to yes a little bit, or you're a big lawyer with big clients and you kind of know how to dictate, right? We operate a life cycle. So, every single day, I'm popping in mentally and towards, "Hey, you know what? This is my billion dollar revenue client. They've got all the heft, they've got all the sort, they've got all the clout. These are all the things they should ask for out of this relationship, because they can ask for it, right? This is how to take all these things over." To, "Hey, this is my startup client. They don't have a lot of leverage. You kind of got to finesse your way to yes. You just can't dictate it. And here's just a couple things you need to tee off to set yourself up for success."

Ryan Lewendon:
The third bucket is really outside in-house counsel. We love what we do, the types of law we do, the transactional stuff. We think we're the best at it. We don't like doing things we don't think we're the best at. So stuff like legal things you need, litigation or trademark filings or searches, FDA, FTC compliance, things that are way more technical, we don't handle those. You wouldn't want me to handle you. If you're getting sued, you wouldn't want me to go to court. I wouldn't know what to do. You would definitely not come out on the right side of it. But because we work with over 1200 companies in the space, we've got a great network of professionals that are similarly situated like us, right? They're sort of experts in their particular field. They're sort of narrow and deep in what they do, and we can connect you with all those people.

Ryan Lewendon:
So, somebody sends you a litigation letter. I'm not going to defend it, but I can send you to one of the litigators that I know that's probably handled that similar type of case many times over. And so like an outside in-house council, we can get you full coverage on all the sort of legal stuff that you need to grow the company. And then the fourth vertical is not legal at all, but I think it's super inherent to my practice, and I call it community building. You know, CPG is a small industry. There's only so many players. There's only so many service providers and retailers and everybody in there.

Ryan Lewendon:
Because I sort of live and breathe this industry, because I've worked with 1200 companies, because we've worked with all those successes, because we're lifecycle council and we get so involved in the company's growth, we've got great insight into who's the best target broker, right? Who's a great Amazon broker? Who's a great PR company for my product? What types of investors are great at the size and scale that I am, that would match up to me and match up with my sort of vision and alignment? Who would be the person to talk to figure out how to partner with a retailer if I'm trying to go omnichannel from digital? We're just a great resource into the industry and the people that are in there, and we're a great sounding board for companies as they grow for sort of the additional participants and the people that you need to put around yourself to make yourself successful.

Rob Gonzalez:
Yeah. So you, in just the scale of the firm and the number of transactions that you deal with, see a crazy amount of M&A in the CPG space. And one thing that's surprising to me a little bit about it, because I'm not that close to the M&A side of the equation here is that a lot of these emerging brands, and particularly the digitally native brands, there was a... seemed like a huge rush to buy them, to bring "digital experience" inside my company to help with digital transformation and all this type of stuff five, six, seven years ago. On the retail side of things, you had Walmart buying jet.com and Bonobos and Moosejaw, and there's just a whole bunch, a whole bunch of that going on. And not to name names, but I think people talk a lot about buyer's remorse for a bunch of these transactions.

Rob Gonzalez:
They were buying big valuations. They were buying momentum businesses. Post-acquisition the growth just wasn't there. That was their pre-acquisition with the lack of VC dollars being burned. And so at some level, it's surprising me that there's this many transactions that you're talking about happening all the time still. So, what's a good versus a bad transaction look like here? How many of these things are actually really, really healthy post acquisition? Is the media focusing on the maybe overpriced, digitally native acquisition failures? If it bleeds, it leads. Are they just picking the small minority of these transactions that maybe aren't great for the acquirers? So, can you walk us through all that?

Ryan Lewendon:
Yeah. Yeah. Robert, I think you're touching on something that's important, but that's become even more important, right? So, digitally native brands, disruptive brands sort of cresting from their upward trajectory when they get purchased is almost the norm. It's almost expected these days. It's been a situation that's been happening for decades, right? The big disruptive, fast growing brand gets purchased, it gets absorbed by the big conglomerate, it sort of peers off. It slows down. The growth stops increasing as much. And eventually, the sort of workforce, they all leave. And the ecosystem for CPG is that founder and that team has an exit. They go start another brand, they grow it, and they sell it, right? But what's changed in the past maybe five years is that the big acquirers out there have started to realize that they're not as great at unlocking value in these brands as they once were.

Ryan Lewendon:
There was definitely a, I wouldn't call it hubris, but there was definitely a belief that you could find a fast growing brand with terrible margins and improve it and still keep the consumer loyalty and the growth. And I think the case studies have indicated otherwise. So, now what you're seeing today, is you're seeing less than a hundred percent acquisition. For anybody who's listening who's got a CPG brand, I would say it's less likely that you're going to do a hundred percent sale when you get acquired than you're going to get a situation where the acquirer buys a majority state, maybe it's 60, maybe it's 80%, but they require you to leave some equity on the table for some period of time before you can sell that last piece. And they're doing it because they realize they're not as good at sort of unlocking that value as they thought, and they realize that keeping that sort of founder team in and motivated for some period of time is important.

Ryan Lewendon:
But why it's important to a brand owner is that the second bite or third bite that buyer takes is going to be post-acquisition, and it's going to usually be based on the performance of the brand post-acquisition. So, today more than ever, having a product, or a brand or a company that can be acquired and maintain its momentum is so much more important for the founders and the creators of those companies. So, there's a couple things you can do to start to prepare yourself for that type of acquisition, which I do think is going to become more and more common. You've seen it in the more recent acquisitions. You're seeing the CEO and the founder, they're staying on post acquisition for long [inaudible 00:14:36]

Rob Gonzalez:
Yeah. The big Kylie Jenner Cody transaction was structured that way, pretty famously for that.

Ryan Lewendon:
Yeah.

Rob Gonzalez:
I mean, in those situations, you can totally see it because her name and her personality and her personal brand is so much of the business that you want the equity incentives to be aligned after the cash transaction. But your statement is that this is not just for the celebrity brands. This is for, in general, the best practice currently to align incentives on a go forward basis.

Ryan Lewendon:
Look, if you've got a brand and you're a founder, and you can sell a hundred percent and walk away, I'm saying take it in almost any scenario, but I think the options for brand owners and brand founders are not going... It's going to be way less probable that you're going to get a hundred percent acquisition. Look, the upside of that is though... You sell your company 60%, 20%, 20%. If you do a great job with it, the last 20% might be as valuable as the 60% when you sold it, right? You might make a lot more money if you do a great job with it. And a number of companies I've worked with have done exactly that. And the accumulation of wealth to the sort of the team, the selling team, can be that much more, but you have to be prepared and put in a situation where you can do that.

Peter Crosby:
Yeah. Ryan, let's dig into that, because I feel like what you're talking about is probably a different set of considerations to be sure that you're building something that will extend its life beyond you handing the keys over and walking away. And so to walk us through a little bit of... What are those essential elements of focus that really should be thought about, maybe in a deeper way than you normally would if you were just thinking, "Oh, I can sell this and walk away"?

Ryan Lewendon:
So, I think when you're, when you're getting ready for a sale, I think there's a couple things to look for in acquirers, right? The first is, does my acquirer have an alignment with my values? Right? Do they have a similar... Hey, if I'm a healthy candy company, am I selling to another healthy sort of conglomerate, or am I selling to a company that is using me to enter into a new sort of value system or a new direction, right? Because continued and immediate alignment on those values is going to be an indicator of greater success than alignment between the teams. Also Rob, kind of to your point, is my acquirer... Does it have a complimentary channel competency to me? Right?

Ryan Lewendon:
Hey, if I'm an Amazon business, and I've got a great Amazon business, does my acquirer also have an Amazon business? Do they sell in a similar way? Do they have similar values? Do they sort of... Do they have similar types of spend in terms of marketing and sales? Are they supporting brands in a similar type of way, or is it completely different? You don't want to be the guinea pig, especially if you've got sort of a vested interest along the way. You want to find someone whose system you can come into and sort of start working and aligning your team and theirs pretty quickly.

Rob Gonzalez:
So, that's an interesting point, because that goes... The trend six years ago, whenever the D2C on Instagram peak enthusiasm point really was, "I'm going to buy this company because they have experience that my team doesn't have. So, I'm bringing in their DNA, their understanding of digital, their understanding of social, and they're going to help us out." And we didn't really see that happen so much, and it's a little tail wagging the dog, maybe wish hope. And so what you're saying is, yeah, that's maybe the wrong move anyway. You should be selling into a buying business whose existing marketing and sales motion is as similar as possible to the disruptive brands.

Ryan Lewendon:
Yes, a hundred percent.

Rob Gonzalez:
How does that... For a lot of disruptive brands, they're disruptive because of going to market, not necessarily disruptive because of product. Vitamin water's interesting, because you did vitamin water back in the day. But Vitamin Water wasn't a digital brand. Vitamin Water is sold in CVS and Walgreens and Stop and Shop just like everybody else did. So, it's like, Coca Cola can buy them, put them on the red truck, go to town, and it integrates really well with Coke's existing model. But these days, if you're disrupting by channel, almost by definition, you're going to be selling to a company whose business practices are not as closely aligned. So, where on the gradient does this divide make sense to play?

Ryan Lewendon:
I think you're never going to find one for one, right? But I do find, if you're a more advanced brand, there's the disruption you sort of take to get off the ground, to escape gravity, to sort of get zero to 10 million or 20 million, right? And then there's the sort of scale motion that you enter into to get from 20 to a hundred or so, right? And usually, that's going to be just by virtue of having to do that many sales. It's going to be a little bit more normalized. And the question is, do I have an acquirer that, at least in terms of my plan... Because you never have a plan that stops at a hundred. You have a plan that... Everybody's got the plan to go to a billion, right?

Ryan Lewendon:
Does the values and the marketing spend and the sort of resources and the attention, does it line up? Does their sort of business model line up with mine? And it's never going to be one for one, because you're disruptive, and you're sort of a... You're a leader, but you want to make sure it's not diametrically opposed. Because when you bring a market heavy, great brand that's sort of appealing to a certain populace and you sort of match it up with someone who wants to get into that business, right? Maybe they're sort of... Maybe they have a low trade spend, they're kind of a lower margin, lower trade spend, more volume type buyer. Those are where you see those things. Those are where you see those things really not jive, and where you are seeing a lot of re-divestitures of those brands later on, a couple years later, or shutting it down. So you want to make sure there's someone who...

Ryan Lewendon:
Again, yes, it's not going to be one for one, but there's sort of... There's not too much dissonance in that long term plan. And then you also want to look at your human capital, your team around you, right? How do I incentivize those folks to stay with me? Because keeping that team and making sure you can keep that team, and when you're doing the acquisition, negotiating a deal where you can keep your team in place and keep some amount of autonomy, whether it's contractual or just understood between the two parties, is going to be so important to sort of locking those last couple bites of the apple.

Peter Crosby:
And in terms of an acquirer, in terms of understanding the acquirer that you would be being absorbed by and knowing whether or not... Because I've talked to a lot of acquired company leaders that have stayed, and that part of the deal was you stay and you teach us how to be digital, some of those things. And I think a number of them walked in not really understanding, and it's hard to from the outside, what are the true headwinds of innovation inside the company that's looking to acquire us. Have you found any secrets for sort of really having that, the understanding, on both sides, be super clear as to what each one is getting into.

Ryan Lewendon:
Yeah. Yeah. I mean, in terms of your... Let's talk from the brand owner's perspective, right? In terms of the things you want to be putting in place now, that are going to have... that I think are going to make the difference between a super successful, huge acquisition, huge multiple brand. There's a couple things right now. First of all, you want to own all your trademarks, right? You want to own your brand. You want to own the name of your brand. I think I've sold one company once that didn't have the trademark for their consumer facing brand, right? You don't need a lot more than that, but... You don't need the flavors and all that stuff trademarked, but you need the brand trademarked, and you need to own it, and you need to have a good competitive moat around it. Then you need to own, and you need to protect your recipes and your specifications.

Ryan Lewendon:
Look, we're not... In tech, we're not making microchips, right? A lot of the consumer goods, there's not a lot of science or secrets to, but you ideally want... You need to be able to show to an acquirer that, look, the exact recipe, the exact specs of my product, I can say I own this, and I can give it to you. If you don't have that, most of your product loses value. So, how do you do that? You protect it most... You are protected via trade secrets. You are sort of protected via NDAs. You protect it contractually with your sort of suppliers and your supply chain one by one, saying that, hey, anybody that works on this product... Hey, I own those recipes and the specs. But any improvements to those recipes and specs, I also own. Because everybody that outsources, you improve on that recipe and specs over time, right? You change it here and there, you get new equipment, you take it somewhere else, and what it looked like five years ago is usually pretty different.

Ryan Lewendon:
So, you want, inherently in there, that all the changes that you make along the way belong to the company. And then can you create a competitive moat in your supply chain? Can you get your suppliers to agree that they're not going to make a similar product for someone else? Right? Because if your manufacturer changes your recipe or specs just a little bit, it's still your recipe and your specifications, but maybe they're coming out with a very similar type product. So, can I create an offensive competitive moat, saying, "Hey, you can't come in and do the similar type of product I'm doing." Shoring up your human capital. Like we said, people are going to want continuity. Acquirers are going to want continuity in that human capital.

Ryan Lewendon:
So, incentivizing your, your workforce, incentivizing your team, incentivizing your team, employees... Mike Repole from Body Armor always says, "Success is best when shared." Right? And he incentivized everybody in Body Armor. They all got stock options. When the company was sold, it made over 200 millionaires and changed people's lives. So, making sure you can incentivize those great key hires, so that when you sell, they can stay on for a little bit, whether it's stay bonuses or ongoing options, or some type of sales goal. And then just as sort of a practice point, establish a great advisor network while you're putting your company together. There's so many things you're going to need to sort of tackle along the way. And most founders, when they come into a company, they're usually either an operations person, a marketing person, or a salesperson, and shore up the things you're not great at, right?

Ryan Lewendon:
Find advisors who... Hey, if you're looking for a sale, find a founder who's done an exit before, right? You can always find good legal counsel if you want to shore some of those up, but you don't need to, right you can find other founders. You can find someone who's great at operations to help you navigate your issues with operations. But if you've got that sort of group around you, you're less likely to make some sort of fatal mistake here or there, which is going to make you less attractive. And then especially in today's market, where inflation is crazy and sort of the supply chains are super constrained, you need to make preparations for your supply chain. You need to be able to tell the story of not how you can get to the exit, but you need to be able to tell a story of how you can get two years past the exit, right?

Ryan Lewendon:
Do I have contacts that can supply me with the products I need? Do I have manufacturing that can make enough of these products? Out of stocks are a huge problem, right? Do I have price protection on my ingredients? Have I established that? Have I built that out? When an acquirer comes to get you, they're going to want to see that you can perform your plan. If they're buying you for a certain price, they're buying you at that price based on the belief that you can perform, after acquisition, the way you said you are going to. And they're going to be looking at and scrutinizing that so much more these days.

Peter Crosby:
Yeah. I know that the Honest Tea thing, seeing Coca-Cola sort of rationalizing their brands and things like that. And I'd seen that part of the... Coca-Cola, it's sort of what you were talking about earlier, that Coca-Cola has now made a similar line that kind of fills that sector. At the same time, Honest Tea was having supply chain issues, it sounds like, getting their product in place. And so you can see how some of those things can lead to a brand going away. I think, at least in my mind, in the Northeast, Honest Tea has been a household brand for a while now, so it was interesting to see that news come out, and the founder of Honest Tea kind of sad about it, but kind of it's the right decision.

Ryan Lewendon:
Yeah.

Peter Crosby:
Yeah. Yeah. And then look, you're seeing divestitures. I mean, you're seeing, ZICO got sold back to Mark Rampolla, the founder of ZICO, right? You are starting to see these big companies find out that the brands they took on weren't maybe best fits for them, and either [inaudible 00:29:17] shoving them down or divesting them. Look, the economy being what it is, the market being what it is, acquirers are going to be much, much, much more cautious about what they do. I mean, if you look in the news, you're seeing more and more CEOs of companies step down because they've had bad quarters or bad couple quarters, and be replaced. And people in these acquirers are going to be concerned about their jobs. And they're going to be less... I mean, big companies are usually pretty risk averse, but they're going to be more risk averse.

Peter Crosby:
And so they're going to want to see, when you're looking for sale, for an acquirer, they're going to be looking more at things like profitability, pathway to profitability. That's something that... If we were talking in 2014, and we were talking about, "Hey, what does an acquirer look for, and what do you need to plan for?" profitability wouldn't really be in a conversation too much. It would be, "Hey, grow your top line, double every year, have a great consumer following, make sure that the sales are sort of real sales and not sort of inflated sales, and that will kind of be it. But today's market, people want... Acquirers want to buy a fully formed asset, right? There was a time when every big conglomerate had a venture fund that was created to get into companies early and acquire them before they had to overpay.

Peter Crosby:
And now these big conglomerates are willing to overpay. They're willing to overpay for a more fully formed company with great fundamentals and great functionality, and that's already profitable, or has a great sort of plan on getting profitable, because they don't want to find that they buy an asset that they can't make money off of later. They're willing to sort of wait and pay a lot more for something that's more of a sure thing than a speculative sort of growing brand. And that, I think, has changed sort of the landscape over the past seven years, in terms of what investors are looking for and what acquirers are willing to do. You're starting to see... You're seeing more and more sort of billion plus, or around a billion dollar, sort of exits. And you're seeing, especially with the steps, you're seeing acquirers pay more, but they're paying more for companies that are a more sure thing.

Rob Gonzalez:
Yeah, we'll see. I tend to think that history may not repeat itself, but it rhymes, and the TikToks in the world and the metaverse are only just beginning to do stuff with products. And I just, I wonder if there's going to be a similar kind of rush. It's too early right now, but you go out two, three years, and you'll see whether the big acquirers are spending on growth in new channels, as opposed to what you're saying, which is business fundamentals. I just tend to think the pendulum will swing back.

Ryan Lewendon:
I think everything's cyclical, right? I think everything's cyclical. And I think as... Look, I think you said it. TikTok and the metaverse, I mean, that is definitely the next frontier on sort of where consumer brands can interact with consumers. And look, I do think there's going to be some really disruptive brands out there, and I do think there's going to be some brands that utilize... And by the way, brands are already using TikTok to great, great success and to rush out and launch and get a lot of sort of sales and get a lot of fan bases. I do think there's going to be some really inventive and disruptive companies, consumer companies that leverage that metaverse, that leverage the TikTok, that leverage all the web3 to sort of really do some... to scale up and get really great sales.

Ryan Lewendon:
And you're right, I do think that there will be some sort of, similar to what we were doing when we're talking about digital sales, there will be some sort of rush to buy some of these brands and buy into that knowledge base. But right now, if you're sort of a... If you're an Amazon business, if you're a regular sort of, if you're doing direct to consumer sales, I do see that. People are looking more for, "Hey, is this company profitable? Is it making a good profit? Does it have a good margin? Are the sales sort of recurring sales? Is the consumer base loyal to the product or the personality of the front person or the founder." Looking at sort of, "Hey, I want to buy a brand where the consumer loves the product, because I don't know if the personality's going to be with us forever." And hey, look, is there... And I'm seeing people look, is there a continued ability to scale? Right? Have they sort of mapped out that supply chain, and do they have an ability to sort of keep fulfilling and build into their plan?

Peter Crosby:
It must be fascinating, Ryan, just as a career kind of milestone in a way, to have been part of the Vitamin Water sale, and then been part of the body armor sale that many years later. And the sort of different criteria on part of an acquiring company and the company being acquired, did you see that in the Body Armor deal, sort of the difference in sort of what each was looking for and bringing to the table?

Ryan Lewendon:
Absolutely. Absolutely. I mean, when Coke bought Vitamin Water, they bought into this tremendous growth. They bought into an independent distributor network. I think we signed up 110 distributors and had to terminate 110 distributors when they sold Coke. And it was a hundred percent sale, and there was an integration that took a period of time. But when Coke came to Body Armor, they didn't buy a hundred percent outright. They came and invested. They invested, and they bought a small stake. And we moved products from our existing distributor network to the bottling system, the Coke bottling system, while Coke was still a minority owner. And that's independent... We navigated. We signed up 86 independent bottlers. We navigated that, we built relationships with those bottlers independent of Coke. I think it was Monster, Body Armor, and Coke products on the trucks.

Ryan Lewendon:
And you saw the company build infrastructure. When Coke came in, the human capital, I think it might have tripled, right? And they started building infrastructure. They started building infrastructure for integration. They started building... "Hey, look, here's a marketing team for each vertical, right? Let's bring people in who know how to sort of who know how to communicate in big corporations, and know how to navigate that sort of communication, that bureaucracy?" It was a three year process of sort of building, integrating, and then eventually exiting last summer to Coke. And look, it was a bigger sale price, right?

Ryan Lewendon:
And I can't speak for Coke, but I would think that they would think that it was worth it, because you bought an asset that their distribution systems are already familiar with. You bought an asset that you've already got, the human capital, the infrastructure that has been built in and introduced to the corporate culture, and is ready to integrate with and communicate with your corporate culture. Yes, it's an interesting sort of milestone in my career, but it's also sort of a microcosm of where things are going and how bigger companies are thinking about acquisitions and sort of integration, and where that goes.

Peter Crosby:
So Ryan, to close, as you think about... I'm going to put on your prognostication hat, maybe. When you look at the product categories and trends that are out there that might represent opportunities for a digitally native brand, what stands out to you as sort of... If you've got capabilities in this area and you're looking to make a score, I'd look at these places. What would be your pick?

Ryan Lewendon:
Yeah. So, that's a great question. I think that the first place I'd look is informed or in personalized wellness, right? Anything that is sort of putting a product, giving a product to an individual based on data that individual can give them, right? I think generally, consumer goods are moving towards personalized nutrition, personalized wellness. The science isn't there yet, right? But I do think someday, you're going to do your test, whether it's at a doctor, whether it's at home, you're going to send it to a company. They're going to say, "Well, this is the best mix of vitamins for you. You digest these types of proteins and enzymes the best, so here's a diet for you. Take that." It's a ways away, right? The science isn't there, but you are starting to see companies use 23 and Me, and just general sort of geographic locations and consumer sort of feedback to personalize some products.

Ryan Lewendon:
And you're seeing it a lot in the skincare and the beauty spaces. There's been some significant investments into companies that have a little bit of that, but I think anything that can offer a mix or a product based on some sort of individualized intelligence, I think is a huge category. I think anybody that wants to get into it and can have a good idea on it should go for that, because I do think it's going to be a trend that gets hotter and hotter and hotter and bigger for the next 20, 50 years.

Peter Crosby:
So you're saying that maybe someday we could, I don't know, walk into a Walgreens and they could prick our finger and get one drop of blood, and out of that, tell us [inaudible 00:39:51] I've been watching [inaudible 00:39:55]

Ryan Lewendon:
I was going to say pick it up, one drop, but-

Rob Gonzalez:
It's like Gattaca. My wife and I just rewatched Gattaca for the first time in a while.

Ryan Lewendon:
Yep. Yep. Well, look, you're seeing... Look, you're seeing, these health centers that are more holistic health centers, and that are focusing not just on treating disease, but making sure you're optimized and your wellness is better. So, I do think... Look, you're getting... There's a lot more opportunity to collect data about your body, your physiology. And I do think the natural abstention of it is taking that information outside the office, outside the doctor's office and saying, "Here's a nutrition plan. Here's what you should eat. You'll digest this better. This will help you sleep better. This bloats you less." And I do find that it's going to only get sort of more and more useful as the science improves, kind of along those lines, but from a sort of a health line is just reproductive wellness and reproductive health.

Ryan Lewendon:
I think... Baby food has always been a huge category. And then you've got sort of prenatal vitamins, which has been a category, and it's been a trend for a while. But now I'm seeing a lot more interest and a lot more focus on sort of, "Hey, how do you put yourself in the best position to conceive?" Right? And wellness centered around that, and health centered around that in a real focus on sort of perceptive health and sort of optimization and wellness. I think there's... Just talking and seeing what's out there, I think there's a lot of interest there. And then just mental health, mental wellness. I mean, look at the pandemic, I mean, everything. We're all locked inside, going crazy. I think there's just much more... There's a bigger focus on self mental care, right?

Ryan Lewendon:
We've been focused on our physical, get to the gym five days a week, eat right, and it's been a big focus on our bodies, but we have sort of put a focus, as a society, on our minds and our sort of emotions. And I think supplements, food, any sort of thing, consumer goods that helps optimize your mental wellness, helps optimize your cognition is a great, great category. And then last, I guess, is oral care, right? There's been... Gut health has been a trend for a while, but you're sort of... The homeostasis in your mouth and your oral, sort of [inaudible 00:42:44] and your oral sort of health is really, really closely tied to that, to your overall health. You see the oral care products out there are sort of mostly just kind of been what they have been for a while.

Ryan Lewendon:
You saw Hello got purchased by Colgate a year or so ago. And I do think those products are right for disruption. I think they're very sort of complimentary to a digital native or D2C type of model, and I do think that's sort of the next physical part of our body that we're going at in terms of overall health and wellness.

Peter Crosby:
That is a list, Ryan. I'm saying to my listeners out there, you innovators, you just heard it. Get to work. Because we are seeing a number of people... I have friends in the business that have worked for the large conglomerates and now are looking for a D2C path where they have some upside, where they have real skin in the game, and they're bringing their operational experience to these fresh ideas. And it's a risk for them. And so hopefully, this list of possibilities might spark some thinking and some new innovation.

Ryan Lewendon:
And look, if you are thinking about starting any of those companies, you should definitely reach out to me. You can find me at www.glaw.us, or my email, which is Ryan, R-Y-A-N, @glaw.us, but I would love to chat with you about any of those if you're starting any of those companies up.

Peter Crosby:
I can't help but support the plug, because just the knowledge you brought to this podcast, Ryan, we really appreciate it. It's a fascinating time with a lot of headwinds, but you're just saying the right ideas, executed in the right way, will always have value. So, that's super exciting. Thank you so much for joining Rob and me. I appreciate it.

Ryan Lewendon:
Yeah. Rob, Peter, thanks so much for having me. This was great. I really enjoyed this.

Peter Crosby:
Thanks again to Ryan for the deep knowledge and the hot tips. There's more of all of that at our website, digitalshelfinstitute.org. Head on over. And thanks for being part of our community.