Kat Cole on AG1's push into retail, clinical research, and U.S. manufacturing

Boom. Welcome. Jordy, I'm going to let you take the intro. Thank you so much for joining. Well, it's happening. How are you? I'm great. How are you guys? We're doing great. It's Friday. We wish it was Monday. We We like podcasting a lot here, so the weekends are always tough, but um how are you busy?

I'm sorry for your wind down. I know. Monday will be here soon enough. I know. I know. I'm I'm sure you feel the same way. Uh why don't why don't you give a quick intro? Uh a brief history.

We don't like to do uh make this, you know, biography, but um but but would love to to have you kind of give your background for the audience. Sure. Uh I'm Cat. I'm the CEO of AG1. I have spent several decades uh in consumer.

I started opening franchises around the world when I was a teenager and had an incredible opportunities in restaurants, food and beverage and franchising for the first, you know, 20 years of my career. By the time I was in my early 20s, teenager teenager got to back up. Uh what what were you doing as a teenager?

Uh you just sort of sprinkled that in there, but uh I'm sure it's a good story. Yeah, I started working at Hooters restaurants as a hostess when I was 17, putting myself through school. I'm the oldest of three girls. We left my dad when I was nine. Helped raise my sisters.

And so restaurants are very common place for young folks who need to work to start to work. And I grew up in Florida. And so I used to pick uh my my first real job after soccer soccer refereeing was picking up cigarette butts at a nightclub in the morning. I would get there at like 6:00 a. m.

and that was that was my job. So, uh very familiar with the the sort of restaurant grind and and it and it certainly it it allows you to bring it's easy to bring the sort of service culture mentality into startups when you're you know responding to like tickets online. uh if you got your start in restaurants. Yeah.

I mean that that that closeness, right, that proximity to the transaction, to the customer experience, if you're paying attention, it never leaves your bones and your soul. And so I stayed in that industry for many years. I was with Hooters for 15 years.

Um helped grow that business around the world and then moved on to a ROR Capital uh really big private equity firm and restaurants and franchising owned portfolio company called at the time called Focus Brands.

uh took over Cinnabon when I was 30 years old as president to turn it around out of the great recession and then built that business into a billion-dollar global revenue business.

Uh then built a licensing CPG division out of that parent company and eventually ran Focus Brands, the parent company, couple billion, eight brands, 80 countries uh for four and a half years. So 10 years at Focus total.

And all throughout that time, I was just becoming more passionate personally about nutrition and fitness. I had kids later in life. I'm 47. I have a five and sevenyear-old. My mom had breast cancer when I had my second, my daughter. And so health became this personal obsession.

And so while I was running these big mass market brands, some of them were sweet treats and fun for you, but some were better for you. Jamba, Mo, Schlatzky's, Mallisters. I wanted more, like more bleeding edge of health and nutrition. So, I started angel investing in better for you businesses quietly on the side.

That eventually coincided with when I left Focus after a 10-year career running those global franchise businesses. I was introduced to the founder of then called Athletic Greens AG1. I'd been a customer for a few years and you know, here we are. That was four years ago. Um, amazing.

what what was your pro personal process diligencing AG1 given that I'm sure you know you looked at hundreds of businesses run these sort of massive organizations what I guess what were the qualities because I think if I remember correctly the time you joined AG1 was when almost everybody was writing off direct to consumer as a category broadly they just said it didn't work the economics weren't there you were giving all of your you know uh you would eventually have to pivot to retail and then that was completely changed the business capital and you couldn't really get to scale.

Yeah, there were a few things. One, I did similar diligence to uh some of our investors which is we were customers. I was a customer for two years and when you have a personal experience with a product and real passion for me it was energy immunity, gut health support.

It made a big difference for me as a as a busy professional mom. So I was a bit of a fan girl of the product itself. But that's just one layer. The second was I actually advised the founder for half a year before I joined. And so talk about diligence.

I had the opportunity to get inside the business, get close, meet the team, understand product, and as every layer I lifted, what I learned was even better than I could have expected. And I had a bit of an ego moment where I'm like, "Oh, this company is so much smaller, you know, than the other ones that I've run.

Is is this really what's right and best for me, even though I love it? " And very quickly I got over that too. This is actually a brilliant time to jump on a health and nutrition rocket ship that's better than anyone knows and has incredible upside. So after advising I joined in November of 21.

So what were the first challenges when you came in? It sounds like a lot of things were going right but there's probably some area that you were focused on. Yeah there I mean there was a ton going right on the outside. Everyone said oh you guys are crushing it.

We did this fund raise right 120 billion or 120 million raised at a 1. 3 billion post. Wow. It was still the end of the frothier era like end of 21 beginning of 22 and the business had done 160 million that year in revenue and bootstrapped up to that point.

So the founder was an incredible capital allocator, incredible subscription business, 90% subscription growing at, you know, multiples not percent. So that's what was good. That's what was great. Fresh round of capital.

the only round of capital we've ever raised uh and a lot of tailwind in the category in the industry and a clear leadership position. What was wrong is that we had scaled so quickly and we only had one manufacturing plant in New Zealand.

So all of that green powder was being blended in New Zealand and most of our business had grown in the US. Yeah. And so job one was scale the operations to support growth. I wanted to launch a few additional products sooner. I wanted to go into retail sooner.

But we had no business doing anything new until we really built the infrastructure and that was expanding manufacturing to the US which we did immediately to support the US business.

So now New Zealand supports the rest of world other source we own our source source highest quality ingredients globally then blend in those countries and certainly that's helped us in the tariff volatility uh moment and so that was job one.

The second was then it was very clear pretty early on that even though there were there was so much energy and tailwind and growth in the supplement category of wellness and a lot of that was getting hyped up and promoted on podcasts and with influencers and creators and we were certainly a part of early very early in that trend.

We were fortunate that some of our early customers became thought leaders and had famous podcasts. uh but it was very clear that science was going to be a critical part of marketing for this category where it historically had not been.

So a few years in, first shore up operations, second actually pull back marketing a bit and reinvest millions into double and sometimes triple blind randomized placebo control clinical trials which take years to build a PhD team to scope the trials to conduct to analyze etc.

And uh so those were the first two things s operations supply chain in particular which includes like QA maintain our NSF for sport thirdparty certifications there's a lot of like high quality standard we needed to protect as we move manufacturing and expanded it which was a little scary as we put our product in the hands of other blending facilities but the team did it beautifully and then make massive industryleading investments that would take an annoying amount of time to be completed and pay off and then use those two things as the foundation once we got them in place to then innovate.

So we wrapped up last year 600 million in annual revenue, one product, one channel. Um yes, John's going to hit the crazy. Congratulations. Yeah, the scale is just wild. Let the waves be. Yes, we deserve it. Uh our customers deserve it and that's fantastic.

Uh but it is time uh and it it was time a year ago to make some thoughtful large focused moves outside uh of that single product single channel model. So just this last week we announced a direct to national partnership with Costco.

So we are now a multi- channelannel company went straight from no retailers to an of the of the largest.

I don't I also I also don't think I don't think people realize how significant winning in Costco is because I've I I'm an investor in a company that expects Costco like in the first I think 18 months to do add 50 million revenue to the business. It's like extremely significant. It could easily be into the nine figures.

And so, um, it's it's great if you can just go from, you know, one channel to adding retail as like this individual, you know, yeah, channel that you can really Yeah. If you're running a small CPG company, our recommendation is just just go into Costco. Just win Costco. It's easy.

It's not for anyone out there with like a $2 million CPG. curious like how much uh I'm curious if you think like most of the issues in in DTOC and consumer brands broadly are just operational because like when I think of structural versus structural when I think of Yeah.

versus structural where it's like hey you have a good product maybe a good brand and you're just or or or a brand that could be good. Yeah.

Um, and and it's just a a lack of of pure leadership abilities internally because like we're very close with the the the Ridge Wallet team and that's a business that like shouldn't be a multiund million dollar revenue business, right?

It was the the original product was a um you know in the early days the LTV was like the LTV was like the first the value of the first order the first purchase, right? And so you would have think there's no way this business could could really scale or be massive and and they have against the odds.

Um, but I'm curious as you look at other DTOC businesses, how often are you thinking this could be great, but it's just not like it's actually just like a operational uh um uh lack effectively.

You know, what's interesting indeed to see is I I've seen both ends of the spectrum where something is actually demonstrating outsized growth, but there's not a lot of there there underneath and it's a window of time before they hit their CAC wall. Yep. and they end up having a lot of unit economic challenges.

And it doesn't mean retail will solve those challenges in particular. And then you see others that have beautiful products, incredible retention, um but just haven't mastered the art of e-commerce marketing.

And so for for us at least early on, I I think people gave us way too much credit for being amazing DTOC marketers. We were not. We had a phenomenal product that it didn't matter what type of marketing we use to have people learn about it. Right? Any marketing is just awareness and trial.

What keeps people ordering months and years. I've got over 500 customers that have been with us for a decade. Wow. A decade. They've been drinking AG1. That is not because a podcaster told them something. It's not because of a billboard or sponsoring a sports team. It's their experience.

And so I don't think we can remove consistent quality and that compounding resulting both growth from those customers individually but we call it the referral quotient. Our number one driver of customer acquisition or post-purchase survey. How did you hear about us? How did you first hear about us? Friends and family.

Number one by a mile. Bigger than podcast. Bigger than bigger than influencers. Bigger than television. We're fullfunnel. We're pretty well distributed from a marketing strategy. I was just listening you guys talk to Dana.

She's amazing and their portfolio is phenomenal and you know whether it's television or community and activations it's all a part of our approach but DTOC really has to have that incredible experience to have its chance. I mean we were rewarded for our focus, right?

Pretty unusual to get to 600 million with a single product. Yeah. And we weren't even on Amazon. This is just drinkagg. com. And that's unusual.

Um, and and I do think that might be part of a a challenge for some DTOC businesses is if they don't get traction or they're not seeing that retention or the LTV they want, then they go wide like SKUs and offerings and you get distracted.

But if you can focus and really differentiate then that that traction is there and the unit economics perform to the best that they can as the algorithms change and as the structure of to your point of structure of digital marketing changes.

On the other side, retail, yes, it's a revenue channel, but it's brutal and your product is in the hands of someone else. And uh but it is marketing, right? It is eyeball the shelf is a billboard.

And so if you can do it well, I believe it is synergistic with DTOC, not the um maybe predicted or feared cannibalization that some might think going into retail. I'm glad we didn't go in early. This is our time. This is the right time for us.

Uh but we have an unusual business and that people stick with uh with AG1 for so long. Yeah. Do do you have a reaction to the news uh this week or last week that Nike is going back on Amazon? Sort of a pivot away from their direct to consumer strategy. I think Nike got a little too inspired by you guys.

I think they try to copy you guys. They saw you putting up like H1 was the last hold out. They're the last hold out. If they're there, all bets are off. Yeah, exactly. Welcome back, Nike. Yeah, but but no, they they they seriously said, "We're we're pull, you know, we're not going to do Amazon.

We're going to focus on our own Nike. com and direct response marketing. " And that's the other thing you guys have blended. You guys do, I'm sure, the vast majority of your budgets around direct response, but when you came on board, suddenly the AG1 brand was aspirational. It was like, you know, cool.

And it was leveled up. It felt like that's been a critical part of the Nike brand is putting the celebrities front and making the athletes the heroes and that kind of fell by the wayside during the direct response era. Hopefully, they're getting back to it.

People were talking about Caitlyn Clark has is signed with Nike, but most people don't even know it because the particular shoe that she wears is like a limited release and so they've gone this like very odd strategy. So, just general lessons from Nike or reactions to the relationship with Amazon there.

I mean, look, it's I it's similar to us and um may we be a Nike one day. What a phenomenal brand, but they've had their bumps as all scaled companies do.

And um we several years ago, as part of that pullback in that lowerfunnel marketing and investment in human clinical trials to raise the standard in research, we also moved the marketing spend we protected to more upperfunnel, right? Building brand brought an incredible CMO recently, former CMO of Yeti.

is a a creative genius and really deeply believes in community.

He always says niche to be mass like go to your people be deep be there for them and we're we have a lot more ground game happening now and so that investment in fullfunnel marketing you get a greater return if you're in more places including the world's largest e-commerce retailer being Amazon.

So for us, and I know this was a part of u Nike and even some other brands calculus in either going off or never being on. For us, there was so much tailwind in organic search and growth. We didn't need to be there to grow the way we grew and we could barely keep up with the growth that we had.

It got to a point where three things changed for us, and I I can't speak for Nike, but I'm assuming this is a piece of the pie.

one um there was a growth of counterfeits and resellers and to protect our brand at scale and you know this isn't a shoe it's something people put in their bodies that's a safety issue that's a brand issue so when part of our thinking of getting back on was seeing the programs that Amazon in particular transparency and others that they put in place to take down either of those fraudulent products people infringing on IP or you know, unauthorized resellers.

That was critical for us. We would not have come back on in the way that we did as in as big of a way if those programs were not in place for this category in particular. It's about quality. We added we had to add holograms to our box with with randomized unique numbers on all of our packaging.

We did this pre-Amazon because the you know, it wasn't just Amazon.

all the marketplaces there were count I'm talking real counterfeits like weird typos and Grinch green powder dark green powder getting caught by customs and imagine getting a phone call from your general counsel and she's like we just got a call from the feds or customs something that says NS for sport so there's brand you're being a very you know like a a politician about this but when I talk to portfolio companies in the supplement space about Amazon on it is just their number one uh one of their biggest pain points and and and just a massive source of of frustration around counterfeiting around you know all the sort of issues that you're when we got back on it was gone gone and um now we're a meaningfully scaled business right so um they've they really this is not being diplomatic I had a ton of risk to my brand and it is now gone on that platform that's Those are the facts.

Um, the other issue was that because the resellers were there, even if it was real product being resold, I couldn't tell you how old it was, the shelf life, the stability. So, I still had a quality concern, but the as big of an issue for e-commerce marketing was it was driving my ratings into the ground.

So, our brand ratings on Amazon were awful. And so, if you would search AG1 on Google, you'd get these great ratings from our site or other sources. And then Amazon, who stars? Three star. I mean, it's horrific. And so, as soon as we got back on, resellers are gone, counterfeits are gone.

We have a limited product assortment there. So, we can be there meaningfully, but keep DTOC is the place for expansive SKUs. Ratings went through the roof because customers are having a better experience. So, it's search, it's about search and discovery as well for us.

Um, where is your team getting the most leverage from AI? There was news this week from Meta talking about wanting to be, you know, basically help advertisers actually generate ads.

Um, Dylan Patel was talking about and and in general, you know, when you talk to brands like the number one thing holding back their growth oftent times and efficiency is creative. Yep. So, it's very exciting.

We're finally there with VO3 where it's not it's at least a drop in replacement for some B-roll or stock footage that you might pull off the shelf. Uh, so yeah, that's a fascinating question. It's God the technology is unbelievable. It's it's unreal.

Um for us the first place AI showed up in the business is our customer service and customer happiness. We partnered with uh with Sierra. We were very early with them and um I have no affiliation with them otherwise being a happy customer.

and uh they partnered with us to craft what we needed and what we got out of efficiencies we redeployed into human resources for concierge programs for loyalty programs which we were actually very late to develop as a subscription business so I used there there was a there was a financial benefit there was a speed benefit for like we learned that 50% of our customer inquiries were things we already knew this we just didn't have the solve that Sierra helped us with um 50% were just manag my account you know like that that stuff can be that's prime for AI so for us AI was first there then we have tools that our team our supply chain team have brought in on um transparency and tracing for ingredient sourcing since we own our sourcing and so it's really helped us track and monitor and enable all because we have pretty rare high standard specifications of our ingredients and have unusual levels of testing of ingredients and so to manage that through the supply chain has been very manual and so AI has helped us there.

Then to your point, marketing, um, we have some interesting thoughts on AI. We are using it for, as you said, digital background, digital B-roll, anything that isn't supposed to be real product and real human because the supplement space has both good actors and not.

We are holding ourselves to a standard of if we're putting a person on camera or if we're showing our product, right or wrong, it's going to be real. and but everything around it, the enablement, the editing, we are bringing every AI tool we can to make that more creative um and more efficient.

Yeah, we were talking to a food photographer earlier today who was uh very nervous about artificial intelligence uh and AI image generation, but was hoping that some of the rules around the way food is is photographed from the FCC market. Yeah.

And marketed because you've seen those famous pictures of like here's the burger. when you say the name of the company that does it, but you know, here's the here's the photo and here's the actual burger and they don't look anything alike.

And you can imagine that being a big a big issue even if AI can be used in the in the post process, there's probably still value to uh showing the customer exactly what they're what they're actually getting. Last question from my side for now.

Do you think that uh do you think that people should be significantly more concerned with the supplements that they choose to put in their bodies? I I there's this uh obviously in the Silicon Valley, the tech world, people will take any supplement if it's like, hey, this is going to make you 1% more focused today.

They're like, I will buy this from some sketchy website and and take it today and and you know, you keep coming back to this sort of like traceability testing, you know. Um we seem an issue, too, but there's no creatine in it.

But I mean, if you test supplements, it's like, yeah, you could be supplementing lead and not knowing it, you know, and so, uh, I think that not every supplement company has the same standards, and I don't think people fully appreciate the potential consequences of that today. Yeah.

I, you know, the the very fast answer is yes. People should be incredibly discerning.

While there are truly so many companies doing the good work, third party certifications, publishing certificates of analysis like us on their site, um all kinds of third party labs, it there still are so many who whether intentionally or not on in the in the mildest form of of the issue, what is on the label is not what's in the product, right?

So if you think you're supplementing with X amount of this ingredient and whether it degrades because of the shelf life and they are blissfully unaware or their manufacturer pulled one over on them and they are unaware. I would say irresponsible in those cases if you're going to sell a product.

Um that that could be happening and in that case it's just an it you're not getting what you pay for. On the other side to your point there could be ingredients that you don't want or don't know are in there.

And so what I would encourage people to do whether they're in Silicon Valley or anywhere is recognize this is a huge industry and where there is growth there will be both good and bad actors. And the great news is there are ways to know who and what to trust. You got to look for third party certifications.

And don't just take the words that someone types third party certified. What third party? Yeah. NSF for sport is the gold standard.

They're incredibly expensive and a a pain in our asses because if I change one thing in this formula, it has to go back through their process through shelf life testing to prove what's on the label is what is in that bag. Yeah. You actually have to go you have to really verify, too.

I I helped start a company in the water filtration space. And we went through the full NSF certification process. It costs hundreds of thousands of dollars.

And then we have competitors that will put the NSF badge all over their website and they're like actively getting sued by the NSF or in legal battles, but they just keep it up because it increases conversion rate, but if you go below the surface, it's like there's just nothing. That's right.

I think the other piece to for for people to think about too is this is unfortunate another layer of confusion is you also then have people doing what you just described starting their own labs and then they are testing product with some unknown methodology and then creating viral content around whatever they find and that just makes it harder for the customer to know.

So I would just say that this is not and anything you put in your body should not just be a listen to someone and click and buy and put it in your body. Go to the website, look at the ingredient section, look at the research section. Do those uh supplement companies have any research on human beings? Yeah. At all?

And I mean you can imagine, you know, because you've got investments in the industry, having four double blind randomized placeboc control clinical trials u with over a 100 people proving the same outcomes of supporting gut health, 10x gut bacteria, beneficial gut bacteria, covering nutrient gaps in four different populations.

That's not cheap. And um but we have to, right? We're the leader. We don't make claims. We can't substantiate. I could have done two studies and that's enough to say clinically backed. We did four, right? We're just we we have to lead because there is so much to be questioned with those in the middle.

And I will offer if anyone is starting a supplement business and if they genuinely want to know how to do this right, I will help them. My team will help them. It is bad for the industry for people who don't take this stuff seriously. That's amazing. Well, thank you so much for hopping on this. Fantastic.

Congratulations on the massive revenue numbers, all the progress. Classic overnight success. We love to see it. Yep. Come back on next time you have news. This is super fun. We'd love to talk to you soon. Thank you guys.