Pete Maldonado (CHOMPS) | From Bankruptcy to Meat Stick Mania

v2 [VIDEO] w- Pete Maladonado
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[00:00:00] Pete Maladonado: I've always been a hustler in terms of like kind of entrepreneurial, always had my hands in multiple different things. Arguably too many different things. I went as, as low as you can go. I mean, I filed bankruptcy, um, when I was 27 years old. I believe that is

[00:00:17] Joe Lemay: welcome to eating glass. It's a podcast where at each episode we ask startup founders, the questions no one else will.

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Go to gorgias. com. Again, that's G O R G I A S. Request a free trial. Mention us, Eating Glass. You will get preferential treatment, and you'll be up and running in 15 days. Pete Maldonado, thanks for joining us on Eating Glass. Uh, why don't you just start by telling us [00:04:00] a little bit about yourself, who you are, and what CHOMPS is.

[00:04:05] Pete Maladonado: Uh, so I'm Pete Maldonado. I'm the co founder and co CEO here at CHOMPS. Um, We started the business about 12 years ago now, um, and when I say we, that's myself and then my co founder, Rashid Ali. Um, Chomps is a better for you meat snack brand. We focus on sticks only. We don't dabble in jerky, bars, anything else we've seen, um, you know, made [00:04:30] with meat.

The idea for Chomps really came to me when I was a personal trainer in college. And back then it was really, you know, how do I make my lives easier for all of my clients? You know, I would, I would spend a lot of time, um, creating meal plans and, you know, grocery shopping lists for custom, for my clients.

And these never stuck to them. Granted, this was about 20 years ago. So I think the op, the options back then were limited. Um, but anyway, from an entrepreneurial standpoint, all of my early, you [00:05:00] know, business and product ideas were always about nutrition, fitness, and you know, how could I, how can I bring those to market?

So, um, Challenge was always one of those ideas I had in the back of my mind. When I grew up, I loved Slim Jims, I ate more than I'd ever like to admit today. But that's, you know, that's just the name of the game. Now, from a format standpoint, I loved eating those versus jerky, because I would, I'd eat them, and they tasted great, to me.

Um, they were a little greasy and [00:05:30] stuff, but, you know, I didn't really think much about it. But I didn't get a crazy, uh, headache. When I would eat a bag of jerky, I would get, it was so tough, I would get a really bad headache from it, my jaw would be killing me. And I'm like, man, why does anybody eat this stuff?

Sticks are so much better. But then, you know, obviously going, becoming a personal trainer, the obvious thought process is like, you know, why is no one making it better for you, son, yet? So that's the, uh, that was the concept there.

[00:05:54] Will Nitze: I'm going to start with a shock and awe question for you. I don't know how shocking it is, but maybe a [00:06:00] provocative question, which is at one point you were broke, like at one point you were down to the dumps.

Right. And I don't even know how long that period was, but you've gone through some dark times, personally, professionally, et cetera. And you are now on the literal other end of that spectrum. Like just financially speaking, you're rich, you have a great family, you have a great life, you grind your ass off, but like.

You've made it, quote unquote. What is different about you as a person based on that evolution? Like, making a bunch of money, like, [00:06:30] did that change who you are? Were you surprised that it didn't change who you are? Just talk us through that

[00:06:35] Pete Maladonado: evolution. Really good question. It's funny, I've never been asked that before.

You can warn me about this. Um, no, that's a good question. You know, so. Listen. Yeah, again, you're, and you're right, I had, I went as, as low as you can go. I mean, I filed bankruptcy, um, when I was 27 years old. I believe that is, and that's not so long ago. I mean, I was, I was, it was 2009, so I guess it is a long time now.

But, um, but [00:07:00] yeah, I mean, I was, I, you know, I, I've always been a hustler in terms of like kind of entrepreneurial, always had my hands in multiple different things. Um, arguably too many different things, uh, which really kind of maybe led to some of that stuff, like spiraling out of control back then. I think I've learned a lot, um, in terms of focus and, you know, again, just like not getting distracted from what I need to be focusing on and, and maybe moving

too quickly, making hasty decisions, those types of things

so I think, I think going through all of [00:07:30] that changed me in a big way because it kind of changed the way I think about how I approach anything in terms of business, um, or really any goal that I'm trying to reach. Um, you know, and then now, obviously, like you said, things are very different. It's, um, from a financial standpoint, I mean, no, not, I mean, I, I'm, it's funny, all the goals that I had in terms of, like, trying to, you know, money and become financially, you know, successful and all that.

[00:08:00] Um, I'm able to do those things now, which is great, uh, but like my interests haven't really changed. Does that make sense to you? Like, like my, my goals grow, like, I, like, I didn't grow up in a wealthy family by any means, my parents had my sister when they were about 18 years old. They had four kids by the time they were 26.

Uh, they were grandparents by the time I was 37. So like the, the, our family's, uh, you know, big reproducers and, uh, uh, but that being said, you know, it's, you know, [00:08:30] money was always tight, you know, trying to make ends meet was really, really difficult, but I always had it in the back of my mind where I always knew my parents were doing everything they possibly could to take care of us.

And they made so many sacrifices for us. So in my point of view, like my goal in life with financial was really to take, take care of them financially like that was, it was less about what can I get for myself? And what can I do to take care of that? Um, then honestly, that's still, that's still what gets me fired up about being successful.

Um, you know, now I actually have [00:09:00] three kids and a wife and like, so I want to make sure they're also, uh, set, you know, again, what, what makes me really, really like excited. Like I cannot, okay. I can't give more gifts to my parents and, you know, I'll never, I'll never get sick of that. Here's

[00:09:15] Will Nitze: the first, here's the first topic that I love your take on.

Going all in. Everyone has a different perspective on this and some people say you have to just dive in. When you have an idea, you want to start a company, you need to [00:09:30] be doing that 24 7. You can't have an existing job, yada yada yada. Like, you can't be one foot in. You took the opposite approach. I think, correct me if I'm wrong, but you started chomps in 2012.

You didn't go full time till 2016 or she didn't go full time till 2018 and you had hit 10 million plus in sales by the time you were both all in, like that is radically different from the conventional wisdom. How do you think about the way you did it differently? Like. Your approach [00:10:00] versus conventional wisdom on just this idea of going all in.

[00:10:03] Pete Maladonado: That decision that we made to go up to, you know, to do this as a side hustle in the beginning was really driven by my experiences running my first company, uh, which is called frozen fitness, which was actually a frozen prepared meals company. It was designed, the idea was really to go head to head with, um, you know, Jenny Craig, Nutrisystem, all of those, and those were the only ones that really existed back then.

Now they're a dime a dozen and you find them really everywhere. These are kind of delivery meal plan companies. Um, but that was, [00:10:30] uh, you know, I started that business, I, I did a lot of things wrong. One of the things I could think of that was like the nail in the coffin for us, for me, was raising money from the wrong person.

And the person had no experience in the food business, um, just from personality, you know, conflict standpoint. Like it was just, it was destined to fail from the beginning. Um, I kind of made some stupid decisions there. But. Um, coming out of it, [00:11:00] I realized I am never going to rely on outside capital to be successful.

And anything that I start, I'm going to be able to fund it myself, or I'm going to make it for sure. It's like self funded and, and profitable out of the gate. And we can reinvest those profits into growing the business. So that was like, and if that's not your goal, then sure, go all in, you know, raise, raise money if you have to, or whatever you've got to do.

I just don't, I didn't want to do that. I'm glad we didn't. And we waited for [00:11:30] so long to actually bring on a partner. And we did it at a time too, where you like, you're not desperate for cash. You're just looking for really, really solid partnership and someone that you can learn a lot from. Um, the way we always say, I want to learn from someone else's scar tissue.

And these guys have been there and done it. And when you get to significant scale, all of the opportunities are greater, but now all of the downfalls, all of your mistakes, everything's magnified. And we realized that we were growing so quickly that we needed to [00:12:00] have someone really, really strong on our side.

Um, and it was less about the cash. It was more about partnership.

[00:12:05] Will Nitze: I think this bootstrapping topic is, is another one, which dovetails with that first topic, which everyone disagrees on. You know, some people are all in the bootstrapping camp. Some people are all in the fundraising camp. I think about it the way you think about it, which is like, do you got to do what's right?

Best for you. And according to your ultimate goals, I would have bootstrapped if I could have literally, how did he do it? I mean, how did you not face [00:12:30] cashflow crunches? How did you finance it? Would your gross margin just, did you just price really high out the gate such that even though you didn't have economies of scale, you had a good enough gross margin where you could sort of bridge that gap?

Like, how did you pull that off?

[00:12:45] Pete Maladonado: When we first started the company? Um, I had, I had saved up a good amount of cash, so I was doing, um, commercial real estate. It was really kind of what I was focused on. And the last real estate downturn when you [00:13:00] saw, um, if you've ever watched like the Big Shore, they started talking about CDO business and these tranches of loans that went, you know, to these different investors.

Like that's kind of where I was focusing. So, um, it was like large scale. I focus a lot on, um, fractured condo projects. So down here in Florida in particular, there was a lot of these. Apartment complex developers were buying them, breaking them apart, like they would actually do a condo conversion out of it, and then they would sell them as condos.

So, um, I focused in that [00:13:30] area, so I was able to, in the end, over the course of like 18 months, I was able to sell 805 condos in a, you know, series of deals. Um, so I made a really good amount of money, you know, back for me back then, that was great, so I had that in the bank. Um, obviously, changes a lot of your decision making in terms of how you're going to build your business.

Um, but I wanted to make sure that I can pay for my own bills and my lifestyle and all that. Uh, while I'm building a business. So that was really like kind of a [00:14:00] requirement for me before I went all in on building a business. So just want to set that straight too. So it's not like I was just not being paid and not living off of like a, in a shoe box.

It's not at all how it was. Um, I was in a pretty decent spot, but I worked my butt off to get there. And to make that happen, I always, and I always saw real estate at the time as a means to an end. I knew I could make a lot of cash very quickly if I just hustled my butt off. And that's exactly what I did.

Getting on to the rest of your question in terms of bootstrapping, like, it was more about just [00:14:30] making sure that I can make, I have control of the decision making. I didn't want any investor, I didn't, you know, controlling any of our decision making. I didn't want to have a boss. I've never had a boss in my whole life.

Like I don't, I've never had a real job. I can never picture myself having a boss and having someone to, you know, tell me what to do on the daily. I just, I couldn't bring myself to do that. When you bring in money that early, you're basically bringing out a boss. Like that someone's going to be there and they're going to be calling the shots.

I'm going to, they're going to have some say. And I never wanted that to happen. Um, [00:15:00] so yeah, that kind of was where that decision making came from. We put in a total of 6, 500. Between Rashida and I. So 3, 250 bucks a piece that got us our first round of samples, a very small production run that we just went to town.

It was really just, you know, starting very, very niche. It was like fitness and diet tribes. So we were going to CrossFit gyms. We were, you know, Meeting people is going door to door. We were in [00:15:30] Chicago. I was still in Chicago at the time. Um, so we were getting a lot of these kind of small, you know, grocery stores, whatever, to pick us up.

And it was all very independent and just kind of like to try to put it, get us, get ourselves out there. Um, but we realized quickly, you know, that there was actually demand for this type of product. We were, we took our small amount of samples that we had. We sold through those. Turned that into an actual very small production run.

So I'll do that. And it just kept snowballing from there.

[00:15:56] Will Nitze: So you were just living hand to mouth. Like you were, you would sell out, take the [00:16:00] revenue. Do another production

[00:16:01] Pete Maladonado: run. We were so focused on like on DTC and e commerce, which the big thing right now is like for me to give advice to someone to say, to do things the way that we did it, like here's the playbook.

Like that's not, that would never work like in this, in this environment and the way so many things have changed. I mean, this was 12 years ago back then, you know, paid ads were a lot cheaper. You know, you get a lot more bang for your buck back then. Nowadays, you know, in competitions different, right? I get, now I've got how many [00:16:30] competitors, you know, in this category.

It's just, you know, we, we, I don't know if he ever would have been able to replicate what we did on a budget the way we did.

[00:16:38] Joe Lemay: If you were advising yourself of the past, or even if you were doing it again today, would you be more aggressive about going all in

[00:16:46] Pete Maladonado: if I'm looking back? Yeah, we probably could have gone in and gone, gone all in a little bit sooner.

Um, but we also realized that we would have hit. A number of different roadblocks and one of them started, we, we, we're a co man [00:17:00] business, right? So we rely on a third party co packer. The co packer that we had back then was extremely, extremely small. They've since, they've grown with us. They have a huge plant now.

They're one of the biggest snack stick makers in the country. Um, but back then they were not. And so when we went from a 10, 000 pound order to a 120, uh, 20, 000 pound order, So producing sticks out of that, that's ra I mean I'm saying pounds, that's raw pounds of meat. Um, they barely could [00:17:30] finish that, I mean it was like, It was, it was a lot of pressure on that, on the co packer.

So that being said, you know, um, yeah, we probably could have raised some money. We could have done some things differently to go a little bit quicker, but I don't, I, we would have hit a ton, a number of old blocks. And I don't even know if it actually would have accelerated anything just

[00:17:47] Will Nitze: because of that.

Were you ever worried about a lack of urgency of like, we got to move fast. Um, or, or someone's going to seize this opportunity instead of us.

[00:17:57] Pete Maladonado: I'd only be worried about us losing [00:18:00] focus. And, and getting distracted by things that just don't matter and things that aren't going to be truly impactful to the business and to our long term strategy.

And so we, we are like really, really good at ignoring the noise. Like, I, I don't know, I can't really explain it. I don't know if it's like an intuitive thing or what, but like, we're aware, we're aware of what's going on around us. We're just kind of just like,

[00:18:21] Will Nitze: Oh, okay. Well, you did have this brand enemy in Slim Jim to a degree.

And I love that concept of like an enemy that

you can rally the [00:18:30] troops around . On the Slim Jim side

Did you, how did you think about them? Did you think about them as an enemy? Did it inform your go to market strategy? I don't know if

[00:18:39] Pete Maladonado: enemy is the right word. It's like, kind of like the. I call them like the behemoth, like that was like what they, they were, like they were there, but they were like the old, you know, the old dinosaur, and like we wanted to come in and kind of reinvigorate the category and bring something new and fresh.

Um, in fairness, I probably wouldn't have started Chomps if it wasn't for Slim [00:19:00] Jim, because I wouldn't have had the idea about the format and all of that, so I mean, I'm thankful that they, that they paved the way, at least in some sense, and people, when they see Chomps, It, I mean, you have no idea, even to this day, I think people are like, Oh, better for you Slim Jim.

So when you try to start, I think any type of new product, if you like, what you want to be able to do is for someone to look at it and within a second, they should instantly understand. Oh, that's what that is. If you don't have that, it's going to be really, really hard. It's a, that's a tough hurdle to get over.

And it's going to cost you a lot of money, a lot of times [00:19:30] in educating consumers or if you can't do that. So I think, I think the fact that Slim Jim did exist. That's what probably is one of the main things that are a major thing that led to us being able to start Chomps for such little money. Curious about, uh, Focus,

[00:19:43] Joe Lemay: uh, you know, you do just meat sticks.

You've got turkey and beef and, and things like that. But, uh, you know, clearly Chomps, it's a great name, by the way. I mean, it could, it could gobble up other categories, right? Do you think it will someday, or are you going to stick

[00:19:57] Pete Maladonado: with that? Obviously, Stix is our core. [00:20:00] And we think about, we call it innovation through simplification.

We've been kind of using that term for a long, long time. And, um, we want to just keep things as simple as possible. Our biggest innovation over the last probably three, four years has been taking a single stick and then putting it into a pack of eight and selling that into, in a multi pack. And that's literally probably tripled the business alone.

Like that alone. It drives more consumption. It drives higher velocities. So same store sales have gone through the roof [00:20:30] and that's the innovation. And so other, you know, people might look at that and the, in the space and like, well, that's not real innovation. You're not bringing anything new to market.

It's like, well, okay, well, the numbers might tell you different. Um, that was innovation. So I think it was, I think it is great. And it was simple. It was easy for us to, to accomplish it. And it, it's, you know, it was a game changer for us. So I think there's a lot of different ways that people need to start thinking about innovation.

Not just Like it's not just like coming out with the next new shiny thing. People get [00:21:00] so like, you know, bogged down with this stuff and it's going to, it eats companies

[00:21:04] Will Nitze: alive. People think about innovation and differentiation as it relates to product. And, and usually product is the minority of that picture.

It's channel strategy. It's operations, repackaging things. Because like, I have this thing, I say all the time, they're infinity people. They're like infinity people. And so you can grow your business by just selling more. It's always better to grow your business by selling more of the [00:21:30] same thing or repackaging the same thing to just more people.

Obviously in an e com context, you want to increase the basket size and all that. Right? So that does help to have different offerings, which you've done within the same category, but there are infinity people.

[00:21:44] Pete Maladonado: One thing there though, it's easier to sell. More of the same product to the same person, if you could figure that out.

[00:21:51] Will Nitze: You've done that via new flavor profiles, for the most part, and new packaging formats, right? Where I contrast that with me, right? We've done that [00:22:00] also through new flavor profiles, but then we also moved into hydration and coffee, and we've done it in a super circumscribed way. So there's like the common trope of, uh, an average product with great distribution beats a great product with average distribution.

And yeah, I've also heard you say in a, in a, in a interview that you could get away with a lot because your product was so fricking good. Like, like you didn't have to have great branding for a while. And you got a lot of grace in other areas of your business because your product was [00:22:30] so fricking good.

How do you think about that? Just like product versus distribution in that context.

[00:22:36] Pete Maladonado: To that point , I do truly feel that the product, in a sense, could sell itself just because, and ti also, by the way, product market fit is critical. Timing is critical. Timing was perfect when we started jobs, it was perfect, right?

It couldn't get much better. I mean, you think about what happened with. The keto diet explosion, uh, CrossFit was still on the uptrend. You got Whole30. They were crushing. You know, they're, you know, all these [00:23:00] are, and any diet you think of right now is all cutting sugar. I mean, most of them coming out are, are cutting sugar.

So we checked the boxes for those and probably the next one is going to come up, right? So I think that's, that's really, really important. The product doesn't taste great. That's one of the things that we spend a lot, spend a lot of time on was making sure the product tastes really good before we come out, come out with anything.

We got very lucky. We landed on. Our original beef flavor, like very fast. And, uh, and that's the one hasn't changed since. And all of our future pro [00:23:30] uh, flavor profiles for the first, like maybe like seven years or something like that was all based on the original beef flavor profile. And we would just add things to it.

So we just added chopped up jalapenos and create our jalapeno stick. And like, that was very simple. Um, But yeah, I don't know. I, I think, um, from a distribution standpoint, yes, I'm seeing it now that we're gaining more and more distribution, there's a kind of this flywheel effect and more people trying the product is obviously going to start leading to, you know, more word of [00:24:00] mouth, they're sharing it, they're seeing it, um, household penetrations, um, you know, we, we start tracking that in a way that's, you know, and then we realize that there's a huge impact on unaided brand awareness.

People are seeing it. Um, so yeah, I think it, it's all, it all goes together. Um, but if you don't have the product piece, it's, you know, any type of distribution that you have and that'll be short lived in my, my point of view. Cause you know, if you're not happy, you don't have the repeat purchases, you're going to start losing distribution.

And when you start seeing that negative, a downturn in ACV, it's like the kiss of death. I'm [00:24:30] curious as well,

[00:24:30] Joe Lemay: just to back up a little bit today, Chomps is just absolutely crushing it and it, it looks amazing. It's amazing. But. You know, I don't, we all three of us know here how hard it is to go from zero to one.

Could you put a, could you put the spotlight a little bit on those times when, uh, you know, you had some existential risks? Um, you thought, am I going to make it out of here alive or bankrupt again? Um, what's that like? And explain that to, you know, someone, somebody might be watching [00:25:00] this and is like, I want to build the next CHOMPS.

It's going to be pretty easy, right?

[00:25:02] Pete Maladonado: But let us know what we're in for. So there were two. Existential crisis is that we faced. And I think one of them was very early on. One of them was probably more recent. So early on, we were making the product. We had a lot to learn. We've learned so much over the years, uh, making sticks.

And it's funny to say, but there's actually a science behind it, which we've learned that science. And our team is amazing at making sticks, um, nowadays, but it comes with a lot of, uh, there's a lot of pain and, uh, [00:25:30] and a trial and error over the course of making the product. It was also actually our co packer.

Had no experience really making products like ours without any sugar added to it. So a lot of people don't know this, but there's a sugar added to most meat snacks and us coming out with a sugar free meat stick was actually, was pretty innovative because it took a lot more to make a product like that.

From a quality control standpoint, there was a lot of investment that had to go into it. Uh, so one of the things that happened, we found out that our, we use [00:26:00] 85 percent lean protein. So 85 15 is what we order from, uh, the cust, uh, our beef suppliers. When we get it, it's shipped in a container 40, 000 pounds at a time.

And so what we were finding was that our, our beef suppliers were sending us a container that was an average of 85, 15. But what would happen was the front of the truck might be 95, 5, and the back of the truck might be 75, you know, [00:26:30] 25, whatever the numbers are, but overall for the 40, 000 pounds, it averages out to, to, uh, an 85, 15.

Problem is we're grabbing case boxes off the front of the truck. And then from wherever we are inside the truck, we're doing 300 pound batches. So now what was happening is you were getting this huge fluctuation in fat content for the, for the, you know, when we were making each, each batch. So come to find out, um, once you, if you go up, uh, you're off the 85, 15 [00:27:00] by two points, either way, the product is drastically different.

So it goes to, if it goes to, you know, it's too fat to, so it's about 83 percent lean. The product will actually fat out. It's called. So it's, it's kind of gross to explain that when it's, uh, we, we, uh, make the product, it's almost like it, uh, it's in the casing, almost like a hose wrapped around, uh, uh, truck or a rack is what you call it.

And you put that in the oven. That's how it cooks. So when it cooks in there, it's hanging vertically. [00:27:30] And then as soon as the heat hits it, the product inside will actually melt, the fat melts and the meat will slide right out. And so that's called fatting out. And it's a disaster. So you end up getting a bunch of meat that ends up in the bottom of this cookhouse and the product is not sellable.

So we would have, you know, back then it was all the money that we had going into a 10, 000 pound run of product, uh, product. And we would get a phone call from the manufacturer when he gets to the, uh, plant the [00:28:00] next day saying, um, the product fatted out. Sorry guys. And like, there was no like liability on his plant, uh, part whatsoever.

We just had to eat the whole thing and start from scratch. And so those, those periods of time were pretty devastating. How did you actually survive that? It was just kind of starting from scratch again, you know, cause we were always trying to reinvest just to get to the next level. So we would put all the money into the next run and all the money.

And like, and so it, I honestly, like, I don't even know how exactly how we got through each [00:28:30] instance, but we always would have a certain amount of inventory left over while we were doing the next production run, try to gear up for future. So we would end up, so we would have to do is sell all the existing inventory to recoup all of the lost investment.

So it was a lot of just kind of plateauing and, you know, this zigzagging back and forth and, um, in terms of like getting to a point where we have some cash in the bank. Um, but, you know, again, that was, I'm glad it happened then and not, uh, a little further down the road because that would have been really, really costly.

I don't know how you bounce [00:29:00] back from, um, you know, 100, 000 plus pound production run. That's, um, you know, half a million bucks or something like that. So that would be a lot of money to lose. So, um, yeah, and you know, it was quite, it was obviously really frustrating. And, um, I think where she and I were kind of losing a little bit of confidence at that stage.

Um, but then just the way we always are, it's like, you know, okay. Like, I don't even know if you get past this, but we're going to try. So like, we would just put our heads together and just lean in and luckily we were able to figure it out. [00:29:30] Um, we hired a lot of outs, uh, external. Uh, consultants that taught us so much about making the product too, um, which I think that was, that's one of the things that he and I are not, I'm never afraid to do, which I advise anybody to have the same mindset is like, there's always something to learn and there's always somebody out there that's done it.

And they've, they've, again, they had the scar tissue to show for it, uh, learn from that person. It's a lot less costly. You get to pay them some money for consulting fees or whatever it is. The quicker you can learn how to, how to [00:30:00] overcome these problems that are going to serve you in the long run. So, um, we've always kind of had that, that same mindset.

Um, the more recent, uh, really scary situation was COVID, which was scary for everybody. Um, and it's kind of interesting because you get people now being like, Oh, COVID probably, uh, completely saved your business or built your business. And I'm like, uh, you don't know the details there. Actually, it's not the case.

Um, in the beginning, when COVID was first really kind of announced and there was this, you know, the [00:30:30] initial like lockdowns, uh, yeah, e com went through the roof, uh, even actually retail went through the roof, all of our wholesale customers, um, one of our biggest customers at the time was Trader Joe's and they, uh, they went from, uh, you know, basically tripling orders that they would normally give us and, uh, So we produce against that.

And, uh, that's, it was a lot of money. It was millions and millions of dollars in inventory that we had to produce. And [00:31:00] then, uh, shortly after they made the decision to limit foot, uh, foot traffic inside their stores. So they went from doors wide open to sit however many people in the store to limiting it to 10 people in the store at a time.

Um, their snack business and our, our snack business was down overnight, over 90%. I think, I think what, like, what, like the feedback I heard was somewhere around like 90 percent of their snack sales was down like, um, you know, initially during that, that period of time. We were actually even [00:31:30] worse because we were positioned at the front end in a lot of their stores, but they put up plexiglass at the registers.

So it was almost like a chomps museum where they would put like, you know, you can see the chomps, you couldn't even get them if you wanted them. Um, so yeah, sales just disappeared. And then what happened was, uh, they had to cancel all those open POs that they had. And so it's millions and millions of, you know, dollars of inventory that we have no home for, you know?

And it's not like we, we did not have the distribution then that we [00:32:00] have today. Um, so yeah, that was super, super scary. And so, you know, the thing that Rashid and I, we were like, listen, like we have an amazing team. That's the last thing we're going to do is start cutting people. Like it was a lot of furloughs happening, layoffs, and we just didn't, didn't do any of that.

Um, We use that time. There was some trading out, if that makes sense, like where we, uh, we use that time to, um, I want to say, let's just say there are people that maybe weren't fitting the culture and fitting, uh, they weren't the best fit for the team. [00:32:30] And we knew that we had, we could get, you know, so we traded up at that point.

So I think it was like three people that we ended up cutting. We hired three people. Um, all immediately after. So, but you know, Rasheed and I were kind of looking at each other like, I don't know if this keeps going on. We're not going to be able to survive this. We didn't have a financial partner at the time, uh, that would lean in with us.

He and I definitely, and at the time, by the way, before we did our private equity deal, Rasheed and I had involved. All in the line. Like this was like our houses were on, on the line out. We were personally guaranteed [00:33:00] for every loan. Like if this all went south, he and I would both be homeless and I'd be back into the bankruptcy state that was, you know, when I was 20, 27.

Um, and so would he. So, um, you know, anyway, yeah. Being said, that was, uh, that was a terrible time for us. Obviously things ended up bouncing back luckily, and wholesale kind of opened back up. And it happened all just in time, it's kind of forced us actually. So we started building new relationships during that time while we had, we're sitting on all this inventory.

So we're able to find a new home for that [00:33:30] inventory. Um, and obviously then when things open back up now, everything's back on and then you're kind of on this new trajectory with new, new customers. We didn't have before that influenced a lot about decision making in terms of how we spend money, how, you know, and, uh, risk that we're willing to take.

And then on top of it, it really led to us running the process to bring in the right partner, uh, to de risk our families because we realized that, uh, When that happened, we had kids and, uh, that's, you know, he and I [00:34:00] go into going bankrupt is one thing, but our family's going bankrupt is, uh, that's terrible.

[00:34:04] Will Nitze: You mentioned, don't be afraid to ask for advice..

There's so much advice. There are these industry veterans, there's these playbooks, quote unquote. You know, there's a way to do it. You go into Whole Foods, then you expand to natural, then you go conventional, then you go big box. Then you go club, and it's like, it's bullshit.

I know it's bullshit because we did none of it and we've succeeded. And I know you [00:34:30] guys have taken it. You have talked about throwing out the playbook too. I'm just curious, like, where do you draw the line? How do you decide who is a good giver of advice? Who is not, who to trust, who, who not to

[00:34:41] Pete Maladonado: trust? I think times are always changing.

Companies are changing. The, the, those decisions that you can make, those external factors are always changing. Say you have a playbook. And what happened and worked once does not mean it's going to happen again. Making decisions based on now, not on some strategy or some playbook or anything like that. I mean, Liz, [00:35:00] our president and COO, she's exactly like all the exact same way. What's in front of us right now? How are we going to tackle this decision? This problem, whatever it is that we're facing, how do we accomplish this now? Has nothing to do with, I mean, like you would think that you, when, when you partner with a stride, you end up getting like this whole Rolodex of people that were like the saviors of their businesses or whatever.

And it's just not how it works. Like they're. If there's people that they know that could be a potential add value at that point, they make it makes an introduction, but it's definitely not where it's like, [00:35:30] yeah, Oh, you know, hold this person's hand. They're going to walk you to the finish line. I think it's just not how it works.

You know? Um, there's a lot of just like thought and deep thought that goes into all the decisions that we make. And, um, And we do that together, and it's all, again, based on what we're facing today. What keeps you

[00:35:47] Will Nitze: going? What is the end goal? What's like the new mountaintop for you?

[00:35:50] Pete Maladonado: Listen, all this work that we put into building Chomps, I want to make sure that this survives me.

Like, it's got like, when me and Rasheed are gone. [00:36:00] This thing better keep, you better be going because we invested a lot of time, heartache and, you know, blood, sweat, and tears. And we made a lot of sacrifices to get here. And in my point of view, I don't think, you know, getting to an exit is like, that's definitely not the end goal.

That's like, I think that's a part of the process because at some point, you know, like there's, there's bigger partners that have the infrastructure that is required to, to really build Chomps to what it could really be. I give you a perfect example, like a DSD network. [00:36:30] We don't have that. So like we don't have the boots on the ground in stores, making sure that, you know, I, I mentioned out of stocks before that's, it's a serious issue.

Merchandising out of stocks, getting like off shelf placements. There's so much more that we could do, potentially do in terms of execution. It's just extremely expensive because we don't have that infrastructure. There's other guys that do, right. There's other bigger partners that do. And so for chomps to get to be this household brand that we're trying to build, um, Eventually it makes sense.

You know, you've [00:37:00] got to cut it. You, there's only so many doors that you can get to. And at that point it's like, okay, now how are you executing within those doors to make sure your product is prominently placed and turning as many units as you possibly can to obviously sell as much to that, that door. So yeah, I mean, that's, that's kind of the, one of the ways I think about it.

Um, obviously we brought in a private equity partner, so our, they need to have, uh, they need to get, get out of the investment at some point. So luckily that's very patient capital. Uh, Um, these guys are [00:37:30] awesome. Like they're just kind of like, they give us advice, which is probably counterintuitive. So like when things are going crazy, crazy, and we're like, we're realizing that, you know, we can do a certain number of volume or whatever, or revenue.

They're just like, why, why so much? Why do you need all that? Like, why don't you just pump the brakes and you know, Do you really need that now? So they're asking me opposite questions that you would expect an investor to, to ask. Um, but again, it's because they've been there and done it though. It's like, they know what happens.

They, you know, [00:38:00] you start getting too excited about things, the wheels fall off. That's when you put too much pressure on the other, the infrastructure of the business, on the operation side, the side of things, on your team. Like we have a, we have a very small team. Like we have, I think 80 people now on the team or somewhere around there.

And we started last year with 35. Now we've got 80. But that's, um, if you were to use that rule of thumb where you've got one FTE for every million in revenue, we're way, we've got about 20 percent of the people that we should have [00:38:30] on the

[00:38:30] Will Nitze: team. There's another kind of trope of you want to work on the business, not in the business.

And I always thought that was kind of bullshit too. Like I still very much, we're worse like you, but way smaller. Um, but you know, we're six office employees trying to do 50 million in revenue. It's insanely tough and you have to work in the business. There is no other way. Like, and not only work in the business, you have to do multiple, wear multiple hats.

And so like, you have to, in certain ways become [00:39:00] corporate, which I know you hate in many respects. I hate, but like, you have to, you just, you're at a certain scale where that's just coming. So how do you like square that circle? How do you balance staying, keeping like the startup be mindset, working in the business still.

But then also the other side of it,

[00:39:18] Pete Maladonado: instead of just focusing on, you know, putting fires out today, um, we want to have a team that can focus on those things so we can be strategic. And then year after year, like things would, something would happen and we would just continue growing too [00:39:30] quickly and then nothing changed.

Right. So we eventually realized like, we've, we've got to just like nip this in the bud and get ahead of it. And so that's when we hired Liz to come in and she's a ball dog. I mean, she's amazing. She could do like the work of five people. So that, um, which is great. So it allows Rashid and I to kind of take a step back and then actually think strategically and, or, and it's just like, it is a little bit of a game changer.

Um, but we do both find ourselves. Just because the way they were wired, just getting sucked into [00:40:00] the day to day. Um, cause we love it. I mean, we just, we love this stuff. And um, but yeah. I think, I think at some point, to your point, being more corporate and being able to focus on like big picture things. Are you having less fun, or is it just different?

It's just different. It's tough to explain. Like I, Some days I, some days I get fired up about the big picture, strategic stuff. And then other days I'm just kind of like, I'm not, I don't know. I just, it's just weird. Like when we, when it comes to like [00:40:30] legal stuff, like, Oh my God, like I, like whatever, like, you know, real corporate stuff, audits and all that crap.

I mean, no, dude, like, I'm sorry, go, someone else got to deal with these stuff, but, uh, but no, I, um, you know, I love, I love talking about HR roadmap. What is the organization going to look like down the road? Who are the people that we need? Um, I like thinking about sales strategy, like thinking about, you know, what, you know, channel strategy, what's next timing, all those things, partnerships that gets me really, you know, [00:41:00] riled up.

I love thinking about who, who can we potentially partner with that can help build the business to the next level, hit a new core customer, you know, customer, or, or, you know, Cohort, whatever you want to call it. Um, and so that's a content strategy. I love that. So that's, um, these are all kind of like bigger picture things that I really, I've been involved with, but I think it's, it's a different mindset now where you've kind of like connecting dots further, further out.

I

[00:41:27] Joe Lemay: remember when we hit some critical [00:41:30] mass and size and the team like just no longer wanted or needed my help on packaging or on particular email marketing assets or anything like that, uh, But then suddenly we had a lot of HR stuff, legal stuff, right. Things I didn't like, um, you know, ERP decisions coming to my, my plate.

That was no fun. I had like both feelings that I didn't like the big size of the team, but then I also started to love it. Which way do you lead? Do you, do you [00:42:00] prefer the early days with a 10 person team? Do you love an 80 person team? Um, is it a mix?

[00:42:05] Pete Maladonado: It's a mix and it's go, it's like day by day, like things, it's like, it kind of changes for me.

Um, when you start dealing with like. Personalities and conflict and that type of thing. Cause you have so many people on a team, like that's where like, I'm kind of like, damn, the early days were so like, you know, so easy and like, it's just like simple that now, and I also like, again, to your point, like having some involvement in those kinds of decisions was always, it's always really fun.[00:42:30]

But man, I can tell you what our team, no matter what I could bring to the table, our team is so much better than us now. Um, and I realized that like, we're very blessed to have the team that we've got. Um, and they bring countless ideas to us all the time. So, um, brainstorming sessions are always fun to do and kind of get in the weeds every so often with them, but they clearly don't need us nowadays as much as they used to.

[00:42:57] Will Nitze: Cool. Well, you want to get into, we have a section [00:43:00] that we do at the end of these, which is sort of a rapid fire, quick questions. 30 second, one minute response. You up for that?

[00:43:08] Pete Maladonado: Yeah.

[00:43:09] Will Nitze: Let's do it. All right, cool. The first one, I love Peter Thiel quotes, and he has one that is my favorite, which is what important truths do very few people agree with you on?

[00:43:19] Pete Maladonado: Well, I'll think about my answer. You give me your answer first.

[00:43:21] Will Nitze: I would say that all problems are people problems. Like I think most people focus on a lot of [00:43:30] stuff other than people problems. And I think At its core, a business is just, especially in the early days, it like really is just the people. Um, and so it's going to succeed or fail based on how good the people are.

And so I think you should obsess more on people really early on. And an offshoot of that is nepotism gets a bad name, and I'm actually pro nepotism. I think if you trust someone, like I hired my wife , for example [00:44:00] It was the best decision I ever made. Was it sort of nepotistic? Yeah. Is she the best person running in that role that there ever could be?

Also, yeah. And so other people would be like, Don't do that, that's gonna, I'm like, no, like if I can trust that person 10 times more than some Miranda that applied through Indeed, I value that so much more than anything else. And again, like, how do you [00:44:30] keep a six person team that can do 50 million? You have to have just absolute animals on that, on that ship.

And I don't think people focus on that nearly enough.

[00:44:40] Pete Maladonado: When I'm, when we're hiring, like, I do not care about, you know, where you went to school, I don't care where you worked or any of this stuff. Like, it's great to ask questions about what the experience is. But it's more for me, it's like the most important thing is going to be, we call the traits of a champion.

And that's what I'm thinking about the entire time when I'm in an interview, speaking to somebody, how is this [00:45:00] person wired? How do they think about, um, you know, approaching problems? How do they think about, you know, Um, do they get like, like frazzled, how, like ego from an ego standpoint, that is like one of the major, major things.

If you, if you ask somebody what's your biggest failure and they have a trouble coming up with an answer. Yeah, that don't work for me, man. Like everyone knows, like for me, I know, I know the big things I screwed up and I don't let that, you know, I never forget those things. Cause that's just the way I hold myself accountable.

And I was like, I'm [00:45:30] always, I feel like those are the best people to have in the team. The people that are most self disciplined. You know, there's other things that those people usually do. It's like, you'd be finding these people are the ones that are like hiking very tall mountains, or they always have like some crazy goal that they're always going after outside of work.

And so I like to kind of just find those, those traits in people. Because those are always the best people

[00:45:55] Will Nitze: to work with. Everyone's gone through the painful experience of hiring someone [00:46:00] who was like the experienced hire. It was the, the quote unquote adult in the room and you were like, Oh, they must know more than me because they did this at X, Y, Z, other brand that got to an exit or IPO or whatever.

And then like within two, three months, you're like, holy shit. Not only is the experience not helpful, it's harmful. They have an ego tied to the experience. So you telling them, no, actually we do it this way is like creates cognitive dissonance in their mind, which then creates strife [00:46:30] between you and them.

Yeah. And so it's just like, I'd rather all six of our people have zero CPG experience. Not a single person has experience. And it's like the best thing ever. Cause no one has any ego around it. Yeah. And see you guys doing just fine.

[00:46:45] Pete Maladonado: So it's like, yeah, that to me is, is more, more important. Um, you know, again, like resume that's.

I like to go so far. I mean, I look, I obviously look at them because I want to like see what they've done, but I think the way that they [00:47:00] answer questions and carry themselves, that to me is so much more important. I like to find

[00:47:04] Joe Lemay: people who have had the experience of being on a high functioning team before and can articulate that experience because I find those people demand and want that experience.

And expect that and just know how to slip into a high functioning team and snap in there really well.

[00:47:22] Will Nitze: All right. What's a commonly cited platitude about what it takes for a startup to win, that's just plain wrong.

[00:47:29] Pete Maladonado: Taking out [00:47:30] outside capital. I mean, this is like, again, people. I get so mad, man, seeing people and they, they celebrate like a raise, like as if it's like a massive win.

Like to me, I'm like, I'm kind of embarrassed. You should be like, I raised this money to get to do something that we couldn't do before. Not because my company is not profitable.

[00:47:49] Will Nitze: At its core. You're asking for help. You're saying, I can't do this. I need you to survive, which is most people would be embarrassed about.

And yet [00:48:00] it's the inverse.

[00:48:00] Pete Maladonado: That's what I'm saying. And. The best time to raise money is when you don't need it, right? It's the best time to do an exit is when you just don't need to sell. Um, and so that's, that's what we did. You know, it's like, I, and I feel like I still didn't even celebrate that. It was, it was more of the celebration that, that we were doing a good enough job, that amazingly smart people that have been in this industry for so much longer than us are excited enough about our brand to cut a check and take a big bet on us.

Yeah. And wanted to, wanted to actually partner with us and work [00:48:30] with us every day. That to me was the

[00:48:32] Joe Lemay: win. I got one rapid fire one for ya. What's something about you that people dislike? My directness.

[00:48:39] Pete Maladonado: Sometimes I just, I don't, uh, filter things I say enough. Um, I don't blame I maybe sometimes lose some of the empathy.

Um, and I've been, as I've been in this role, it's kind of forced me to start thinking about how, how I'm communicating with other people. Um, we actually hired a leadership coach. It forces me to think before I speak. And especially when it's speaking to the [00:49:00] team. I think sometimes for me, it's like, I don't, I'm not going to hesitate in giving my, my feedback.

Um, Because I don't think that's a smart thing to do. Like we need to get jobs done. And we, if there's something needs to be done, I need to let them know. Uh, but I will, like, maybe I'll approach it in a different way. Rather than just blurting out what my thought is or things that they need to work on, I'll caveat it with like, listen, you guys are crushing it with this, this, and this, we have a higher, highly capable team.

We have, you know, whatever it is that we have to say, like we're, we're, we're killing it, like, these are all the truths. And then [00:49:30] remind them, like, you're doing an amazing job. There's always, it doesn't matter what. Level we get to, there's always going to be something for it to work on. And it's my job in my role to find those things.

And so I'm supposed to be coaching you no matter how good we get, how good you are, there's always something to work on.

[00:49:46] Will Nitze: All right. Biggest mistake and biggest regret in your startup journey. Yeah.

[00:49:51] Pete Maladonado: I think the biggest mistake in my old, my, my previous, uh, startup was. Which I fixed this time around was waiting to get everything perfect [00:50:00] before bringing it to market.

And that was like, that was just the ultimate downfall. It led to a series of bad decisions, um, which ultimately led to, led to our failure.

[00:50:09] Will Nitze: That's like the, the innovators dilemma, right? As soon as you get more corporate. You, you have a lot to lose. And so rolling out something that's half baked has much bigger stakes.

And so you just don't do it. You've been in the dumps and you've been at the highest of the highs where you're currently at. But just how do you define. [00:50:30] How did you define success pre startup or pre chomps in particular, and how do you define it today? And how has that evolved?

[00:50:38] Pete Maladonado: So I think early on, you know, it was obviously, it was probably more of a financial focus, which it is for most people, right?

You just kind of want that financial freedom. You don't want to have to. Growing up when, and most people, a lot of people grew up like this, where, and I'm not the only one, where you kind of always have it in your mind that like, You know, just money worries, you know, and watching my parents stress out about that.

I want him to [00:51:00] get to a point where, not that I have so much money that like, you know, I just want to get to a point where I don't need to think about it. In this stage where I'm at right now, I'm realizing like there's a lot of things in my life. I've got three kids. My kids, my kids had to sacrifice a lot.

They didn't make the decision to, they sacrificed it. They didn't see me for a long time. COVID actually was a blessing for me. You know, I got to teach my kid how to ride a bike. I taught my daughter how to walk. For me, like now success, success. It was like, I still, I [00:51:30] still think that not having to worry about money is a great thing.

Uh, and it also allows you to focus your time on things that are more positive, like spending time with my family. What can I do next to like, you know, with them, what experiences can we have just to have, you know, have a great life, so, yeah. That's uh, yeah, but I, I, it's funny though, parents are strangely, um, probably the ones like ones I look at where like they're very successful, they're, they're just happy people, you [00:52:00] know, they, they're great grandparents now, they're 63 years old, they've got, you know, they're relatively young, so they probably have a lot of years left, hopefully, knock on wood.

So stress, stress reduction

[00:52:11] Will Nitze: via financial freedom, family. And just like general content in this. Yeah. Boom. Thanks for coming on. Thanks for the time, man. Yeah, for sure. I have a good work guys. All right. That's a wrap. Thanks for listening. And thank you to our sponsors. IQ bar, go to amazon. com. Search for [00:52:30] IQBar, buy one, wait for it to arrive, leave a review.

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