The Startup CPG Podcast

Hector Salvidar
In retrospect, I would have paced myself a little bit more on the growth. It's inevitable to get excited, you know, when Target or Walmart or Kroger or Albertsons come to you and say, you know, we walked you in and we're going to give you 2,000 stores, you know, it's huge. Is it the right thing to do at the stage you're currently in? And that's what you really need to think about. Right. And really be disciplined about it. Right. For me, there was a couple of retailers that we decided to move forward and it was not the right time to go to a thousand stores or even to go on a search, even to go to 500 stores. You have to think of how you're going to activate that.

01:01
Daniel Scharff
Welcome everyone to the startup CPG podcast. There has been a burst of recent M and A activity and we're here today to celebrate and reflect with Hector Saldivar, founder and CEO of Tilapita Foods. It's a better for you healthy, Mexican inspired food brand that uses clean and simple ingredients in all its products. They were the first brand to introduce Nopales cactus as an alternative functional ingredient. And Hector was even recognized by time magazine as one of 80 Mexicans helping shape contemporary culture today. On the episode we talk all about the history of the brand, how they grew, his time on Shark Tank, and of course, all about the acquisition by Velore Foods, including what led to it, how it happened after a conversation at Utopia, and so much more. I love hearing about positive outcomes for brands.

01:47
Daniel Scharff
So I hope you love this episode just as much as I did. Enjoy. All right, welcome everyone to the podcast. I'm really excited to have Hector on here to tell us a story because as probably most people are aware, recently Tlupita was acquired with a deal with Velouris Foods. So I was really excited to have Hector come on to just tell us all about it and I think it would be great just to first start with a little bit about the brand. So, Hector, welcome to the show. Do you mind introducing yourself and just telling us a little bit about your story?

02:23
Hector Salvidar
Absolutely. Thank you so much, Daniel, for the invitation. It's a pleasure to be here. My name is Hector Saldivar, a founder of Tia Lupita Foods. We are a better for you Mexican inspired food brand that uses clean, simple ingredients in all of our products. We have a line of hot sauces, no added sugar, low in sodium, non GMO and gluten free certified. We have a line of brain free tortilla chips as well we use a novel ingredient in them called cactus nopales, which provides a lot of fiber in per servings. And we also have a line of salsa matcha, also known as, or as I like to say here, Mexican Chili crunch is a oil based, olive oil based chili oil made with chili morita, fried garlic pepitas. Quite delicious. I like to say it's the condiment you didn't know you needed.

03:16
Daniel Scharff
All right. And so I know a little bit of this story because I watched your shark tank. But can you just tell everybody, like, what made you want to start this? What was going on? How did you get the idea to do it? How'd you get the confidence to just go for it?

03:29
Hector Salvidar
Yeah, great question. Absolutely. You need a lot of confidence to take the dive and the plunge into the, into entrepreneurship for sure. And, and I can safely say that I am not a very confident person, but, you know, taking a lot of years of friends and colleagues kind of like pushing me to do this. So it all started sharing my mom's hot sauce. It's a family recipe hot sauce, very unique in the part of Mexico that I'm from, in northeast Mexico, you know, when I moved. Cause I'm. I'm originally from Monterrey, Mexico. And so when I moved here to San Francisco, my mom would ship me carrot packages, right. So I started sharing those care packages. And I think the uniqueness of that hot sauce transported over here because it was also unique in my hometown.

04:15
Hector Salvidar
People would show up, ring the doorbell randomly to ask for my mom's hot sauce, you know, to use it for their tacos or whatever food they brought. And so that translated really well also to the United States. And so for many years, I would share that hot sauce. Yes, I was the guy that brought the hot sauce to the workplace. But that helped me to realize that this was unique. And people tried it, they loved it. And every time I went back to Mexico would be more and more and until it just became unsustainable. Right? And so that gave me the confidence, that gave me the boost, you know, years and years of people trying it, new people to try it, asking for it, and people that had it want to get more and more.

04:59
Hector Salvidar
And so, yeah, that's kind of how it all started.

05:02
Daniel Scharff
All right. And so, you know, I think you've probably had a lot of pivotal moments for the brand as you grew from just somebody who found the confidence to launch this product and start getting out into market to then starting growing in retail and you know, I think you actually got like $900,000 in sales your first full year actually in the market. Can you just talk a little bit about that journey, getting into retail? Like, how did you manage to grow so fast?

05:29
Hector Salvidar
Yeah, it all started fairly quickly. I always like to say to other future entrepreneurs and people that are starting a food and beverage is kind of like to start small, always start small and start building from there. And that's exactly how it started. But it went fairly quickly. It grew fairly quickly. I think that's two other factors. But I did the. At first started doing it this myself. I would make the hot sauce. I would rent a commercial time in a commercial kitchen. But before that, I bring my mom over from Mexico so she could teach me how to make the hot sauce. So I had to learn and I had to, you know, I had to source the ingredients, find the suppliers. You know, not a lot of red jalapeno suppliers over here. So kind of looked for all that.

06:18
Hector Salvidar
And then once I was able to secure all that, then I kind of rented a commercial kitchen. I was able to do seven cases of hot sauce for the. The time allocated in the commercial kitchen. And with those seven cases, I would go out here in. In the San Francisco Bay area and, you know, drive around and knock them on stores, especially those specialty mom and pops, you know, where they would appreciate something that was artisanal or small batch, right? And through there, you know, little by little, it started to grow. So I did this, maybe, I want to say, for the first two to three months. And then I, a little local distributor wind of me, called the food guys or three old grumpy men, like really salty man.

07:06
Hector Salvidar
But they saw that I was putting the hot sauce kind of like in their territory, right? And so, you know, then that's kind of how I started, like, thinking about, all right, now there's a middleman now, what does that do to my margin? And, well, now I need to find someone that can co pack it for me because, you know, seven cases, these guys would move it like that. So I started interviewing co packers, and it was like a very natural progression that I could keep up with, right? And. And within six months, six to seven months, you know, I went from a local distributor to a regional distributor because Whole Foods also saw my product and that Whole Foods wanted to bring me in.

07:46
Hector Salvidar
And so for me to get to Whole Foods, I need to be at a bigger distributor, you know, more structure, all that stuff. And within less than a year, I was already adding a second skew up I always like to say that to do a startup, a food and beverage startup, aside from the confidence to take the plunge, you have to be a little bit of ignorant and overconfident, right? And so, for example, in my case, I was like, I only need one. One skew, right? You know, one hot sauce. That's all I need to make a business thinking about Tapatio has only one skew, you know, Valentina, Cholula, et cetera. So now they have Cholula specifically has many different skus. But that was kind of like what I was. What I was thinking.

08:28
Hector Salvidar
And so, yeah, that's how it all caught on little by little, but on a very quick progression and all that also, you know, that also helped me to realize, know, being out in the market, being visiting stores, that's kind of key and very important. Sometimes a lot of entrepreneurs see the romantic side of the startup, right? Which is, you know, like, there's the hustles of the pitching and the raising money and this and that. But for the true part of entrepreneurship is getting your hands dirty, being outside and selling, being driving store to store, getting doors slammed in your face, waking up super early because buyers in grocery stores all get in super early and they. There's very limited time to receive people. I also had that background in me when I started in food and beverage.

09:20
Hector Salvidar
I started as a field rep, and so I had that passion and disregard of not caring about getting dirty and bringing product and helping merchandising shelves at the store and creating relationship that way.

09:36
Daniel Scharff
I gotcha. So let me ask you a question, because people always talk about how competitive different categories are. You know, I hate hearing when people shoot someone down, like, I don't know, that's a really competitive category. I. So I'm like, yeah, everything is competitive. You know that? Like, tell me a category that isn't competitive is what I always say. But if you want examples of really hard categories, I'm like, hot sauce. That seems like the really hardest one because I feel like I know 1000 people who have sent me a hot sauce sample and I'm like, I don't know, it just seems like the barrier to entry is low because I think a lot of people feel like they can make one and it's pretty easy to get one made in a, I think low moq.

10:15
Daniel Scharff
So what do you think was key to you actually doing it and doing it successfully and getting onto shelves and getting off shelves?

10:21
Hector Salvidar
Yeah, I still hear it today. Like, it's like, how were you able to differentiate your hot sauce from others. And you know, in my case, I love hot sauce. I was raised in a place that ate spicy food quite a bit. When I moved to the United States, I couldn't find a hot sauce that tasted like my mom's. So that was kind of like for me, I was kind of doing this for myself. Right. Like, you know, at the end of the day, if nobody buys this hot sauce, I'm making it for me. And at least the circle that it has been asking for me for this hot sauce, let's call it almost 10 years. And so the tricky part here was how do you stand out on the category on the set? You know, a shopper has four seconds.

11:12
Hector Salvidar
You have four seconds to get the attention of a shopper walking a four foot set. I think it's less than four seconds, you know, because of attention span has been, you know, diminishing, getting shorter and shorter. So kind of like what I did is going out and doing your own market research, right, and seeing that in the hot sauce set, for example, they're all the hot sauces have the same shape bottle. They're all five. They call the five ounce woozies that skinny bottle. Number two, most of the hot sauces are vinegar based or the number one ingredient is kind of vinegar or water. Right. Which makes it very runny. Not necessarily, you know, something that would stick or grip on the food.

11:55
Hector Salvidar
And number three, for me it was also, you know, I like to do this exercise when I talk about the positioning of the lupita is when you close your eyes and you think about that hot sauce. It's very polarizing, it's very macho driven. It's very like it's all about flames, skulls and bones, the devil, a donkey farting flames. And so, you know, so all that for me was like, okay, I can definitely differentiate from all this three things that make it so monotonous or so overwhelming. And so I wanted to make it the hot sauce that was approachable, that communicated flavor. And then the other thing on top of that is I understanding that it was a Mexican and I trying to elevate my heritage and bring authenticity. I didn't want to be casted as your quintessential. Oh, like the Mexican branding, right.

12:56
Hector Salvidar
Like there's always the cutouts of paper mache or a sombrero or a mustache or a pinatas. There's always something around those elements, typecast elements for Mexican food. And so for me, I was like, you know, authenticity, it comes from the house, from the home. And so Tupita, when people ask me, well if it's your mom, why do you call it tupita, right? It's like, well she is my mom, but she's your tia. Like she's your aunt. She's that's our kind of way to welcoming you to the family. So I think, you know, I, I used all those elements to try to differentiate and position us hot sauce. And then you know, then you have the other attributes, right? Like you know, the non GMO and the gluten free and the no sugar added but low sodium.

13:48
Hector Salvidar
We're one of the lowest sodium hot sauces out there. And so then our number one ingredient is the pepper versus you know, water or vinegar. So those I think, you know, come in a secondary and tertiary points. But yeah, for me those that's was what I used to differentiate ourselves and tell most importantly and I think this helped me having the background of working in food and beverage was understanding what buyers are interested in, buyers are looking for it and what buyers are interested in and what buyers are looking for the category and how they measured is incremental dollars, right? They want to bring a product that it's not going to steal share from what they already have, right?

14:32
Hector Salvidar
Why would I be interested in bringing Tlupita to steal away from what I already have from Cholula or Tabasco or Tapatio or Frankie Red Hot. So our position was we are premium and the premium segmentations of hot sauce category was just starting. It, it was not even there. It was just starting, right? And so by positioning us ourselves as premium, were able to tell this in story of incrementality, right? That the shopper that you have your everyday user of hot sauce that uses FR hot or breakfast, lunch and dinner, but that same user will buy on top of that a premium hot sauce to reward themselves when that when they're cooking something really nice, right? Or when they have guests over there. It's the same dynamic as beer, right?

15:27
Hector Salvidar
You know, you have your everyday beer drinker, your Co Light, Miller Bud Lights, et cetera. And then you have that same beer drinker that's going to grab that artisanal IPA, six pack or four pack of IPA that costs $1780, right? So that, so that they can share that when they have a guest or after a long week, it's the weekend I'm going to open it and they don't care that beer cost, you know, $4 is an interesting Point.

15:56
Daniel Scharff
About the, you know, the branding being a little bit differentiated and incremental. I'm not somebody who grew up with hot sauce. Nobody in my family was reaching for hot sauce to put, where are you from?

16:08
Hector Salvidar
Where. Where did you grow up?

16:09
Daniel Scharff
Chevy Chase, Maryland. So.

16:11
Hector Salvidar
Oh, yeah.

16:11
Daniel Scharff
Well, yeah, so, you know, kind of Vanill.

16:17
Hector Salvidar
We.

16:18
Daniel Scharff
We can't handle the heat there. Although as an adult, I have learned to really enjoy it. So as an adult, I've learned to enjoy it. But when I have been out for dinner with friends who do eat a lot of hot sauce, it's funny how they order it because they'll be like, and I want hot sauce. Like. But, like, give me the real hot one. And they kind of, like, look around at everybody, and it's like a point of pride, you know, like, yeah, I can. I'm a man, and I can handle the hot stuff. And, you know, I feel like the kind of branding you're talking about, at least with, like, my guy friends who I go out to dinner with, like, they'd be like, yeah, that's the one. That's the one that speaks to me because I can handle the hot stuff.

16:49
Daniel Scharff
Like, the macho branding, I would even do it.

16:51
Hector Salvidar
The way I chose branding was it would be more to talk to you, to get your interest in trying our hot sauce. Like. Like, you know, having you walk that set instead of, you know, quickly step right past it, you know, maybe stop and say, hey, this one looks delicious. This one seems like it's not going to burn me or make me uncomfortable. Because I also hate that, you know, even though I grew up eating spicy food is meant to be enjoyed, my mom would say that hot sauce is supposed to enhance the flavor of the food you put the hot sauce on, not mask it. And I don't know if that makes sense. Right. Sometimes hot sauce is so overpowering that you only taste heat and not the food you're growing either. If it's poultry or fish.

17:42
Daniel Scharff
Yes, I know what you mean. So your. Yeah, your branding actually makes sense to me in terms of how people would look at it as incremental, because as I got older and, like, you know, moved around and experienced dining out with different kinds of friends, then I would be really impressed with the ones who would order their meal and be like, and I want, like, what kind of hot sauce? I want extra hot. And then they would kind of, like, look around and everybody, like, with some bravado, and you're like, whoa, okay. And so it did kind of seem like a super macho thing to me. And so it kind of makes sense when you're talking about a lot of the branding that's out there about, like, fire and, like, you know, very macho and just, like, really aggressive stuff.

18:22
Daniel Scharff
So it then that also then following makes a lot of sense why a brand like yours that isn't intimidating, that isn't overly masculine, would bring incremental consumers.

18:32
Hector Salvidar
That was kind of like what I wanted to do. I wanted to connect with the Daniels of the world, right? Like, to people that instead of walking really quickly pass by the hot sauce said, you know, maybe to stop by and to pay attention. Like, why does that bottle look different? Oh, that bottle actually looks delicious. Right. And picking and seeing that the. The ingredient, there's no crazy ingredients about it. Right. You know, my mom would say that hot sauce is supposed to enhance the flavor of the food. You put it on, right. Not mask it. And those people that I was like, bring me the hottest that you have available. Unfortunately, that's what they're doing to their food. They're. They're going to mask the flavor of the food. You put it on, you know, with just heat and uncomfort.

19:23
Hector Salvidar
And that's not what we want. Right. And so that's hot sauce is to make. Supposed to make food taste better, not to make. The only thing you taste is hot sauce.

19:34
Daniel Scharff
So what do you think is actually happening when you bring people like me into the set? Because honestly, I never would have looked at hot sauce at all. But I think just my personal journey back into hot sauce, I think there are maybe two brands that just, for whatever reason, kind of got me interested in it. One was Yellow Bird with the ghost pepper. I don't know why, but for some reason, I think maybe it's a different kind of heat where I'm like, oh, no, this is, like, good, and I can handle it. It's not too hot for me. Like, you know, didn't just, like, blow my tongue up. It would give me kind of like, I felt like roof of mouth kind of hot, which I feel like I can take better. And I just got.

20:09
Daniel Scharff
I was like, oh, no, maybe I do like hot stuff like this cool. And then I feel like also maybe fly by Jing and, you know, just kind of explosion of chili crisp, that kind of stuff. Got a lot of people interested in hot stuff in general. Like, yeah, maybe I do like hot stuff. People who, like me before didn't have this culture growing up of loving hot sauce instinctively. So, yeah, when it comes to appealing to people like me, do you think that there has been a shift of a lot of new people finding their way into hot sauce?

20:38
Hector Salvidar
Absolutely. Absolutely. And the way that it just. I think the evolved of. Again, you know, if. If we go back to the comments I made before, it was like, for the most part, you know, hot sauce here in the United States is just water, vinegar, salt, and the pepper. Right. And so, you know, what Yellowbird did was bring other profiles of flavors and ingredients, like, you know, carrots and onions, you know, into the hot sauce that complement really well and dilute, you know, the. The spiciness. For example, you know, like you said, ghost pepper. Ghost pepper is a super spicy pepper. Like, there's no way that on. On its own, that is something that is that. That we could. That at least I could tolerate. Right. So. And actually, same with the habanero.

21:32
Hector Salvidar
For me, for example, habanero is one of those peppers that is delicious. It's fruity and. And it has depth and has some incredible brightness, but it's very high on the Scoville level. And how can you put habanero on product without just, you know, fatiguing your taste buds? No, that's kind of like what I like to say. And so for us, at least, it's like, all right, so, you know, let's tear it using. Using my mom's recipe. But we also use, you know, mangoes and dates and carrots and onions, you know, kind of like to dilute that heat and just, you know, complements and amplify the flavors of the pepper so it becomes a very pleasant experience.

22:17
Hector Salvidar
And same with the chili crisp, the Asian chili crisp, that's something that I was very pleasantly surprised to see catching on, you know, and that's kind of like understanding that's coming from a different culture, from different countries, trying to ride that wave, because, again, in Mexico, we do have our. Our own style of chili crisp or chili crunch, and that is, you know, salsa matcha. And for us, you know, we use different spices. You know, the Asian chili crisp, they use, you know, some spices that are a little bit more numbing, which is. It gives it a different experience. And not numbing in a bad way. It's numbing in a good way. Right.

22:57
Hector Salvidar
Versus us, it's maybe a little brighter for us, maybe it's a little nuttier on that regard, you know, maybe there's more hints of sweetness because we do use, you know, maybe some fruits. Like, for us, we use raisins and cranberries in one of our versions. So usages are kind of like the same. And so if you want to put salsa matcha in your noodles and your rice, you totally can. The same way that we can use chili the fly by Jing in tacos and eggs.

23:30
Daniel Scharff
Yeah, interesting. Yeah. And yeah, I know they use a lot of, yeah, Szechuan peppercorn that has the numbing, like mala, I think they call it effect inside of it. A lot of people have been. Yeah, if you go to a lot of Chinese restaurants, you might have it in a spicy dish which can numb your mouth and even like kind of make you salivate a little bit, which is pretty interesting when mixed with the flavor of the dish. And yeah, the couple brands doing pretty interesting things with that these days. So let's fast forward a little bit because I'm really interested in know congrats on the successful acquisition. We know it can be really hard to make that happen in the slack.

24:04
Daniel Scharff
I always see brands like even in their first year, they're like, hey, I would love to sell this thing probably now at this point, anyone know where I can. I'm like, it's very hard. Like, you know, people are not interested in acquiring generally a brand at a very early stage. Even if you think you've created this incredible recipe, you know, and like gotten a couple doors, it's really hard to create something that somebody really sees the value in acquiring to grow. So can you just tell me a little bit about how this all came about? Like, how do you decide that this was the path you wanted to pursue? How did you get acquainted with the acquirer, all the good stuff?

24:38
Hector Salvidar
You know, in our case, it was that we started pretty much this decision the moment we started to raise money. Right. The moment you start raising money. And I think it's past that friends and family stage. Right. That seed round where it's like, all right, this is going to be the path, you know, and either you. When you start your business, there's two ways, I think, and there's no ifs or buts about it. There's two ways. Either you are going to do this profitably at your own pace, right? Which means grow as fast or a slow as you can where you can still pay your suppliers, maybe yourselves, if you can, in the black P and L book, or the let's raise money, let's pour cash into the business, let's see how quickly it grows.

25:38
Hector Salvidar
And profitability is not that important because of the growth and performance we're going to become point of interest to a strategic or whoever can take it to the next level, it's when you start falling in the middle that it becomes kind of like, you know, really hard and things start to get a little dire. You know, for us, we didn't raise a huge amount of money. You know, we did a friends and family, I think, you know, we raised around, you know, 500, maybe 1200 to 600K. Then we did a little pre seed, which we raised another 700k. And then we did a seed round where that was like the first time we raised a good chunk of money. And I think, you know, between our two main strategic investors, we raised I think 2.5 or 2, you know, 2.5 million.

26:34
Hector Salvidar
And you know, with that we're like, okay, we have the funds now to take us to the next stage. We have our path to profitability. But then you also start hearing the requirements of such investors and you know, you start, you know, receiving feedback. And even though you have your plan and even though you have your, you know, your objectives, you start to get distracted and diluted, you know, with the information. And it's like, maybe you should do this or maybe you should do that. In our, once we raised money, we start to see that also our burn rate grew and we're like, you know, what this is, this, at this rate, you know, we're going to have to raise money again. And then you just start saying, okay, so I'm going to dilute myself again.

27:24
Hector Salvidar
And you know, when is this going to be? It's a never ending cycle. Right. I think the idea to partner with strategic came really quickly for us. I had already been having conversations with the lore, I want to say, three years back. You know, obviously were small and, but they did a really good job just on the, establishing the relationship. And for me it was like a, you know, having them in a possible interest partner was very important. Understanding the brands that they have and the brands that own them. And so last year, sending Nootopia, you know, it was one of the tough, one of the toughest times actually in my life.

28:09
Hector Salvidar
I had just had to let go two of our very important team members, like person that was in charge of marketing and my head of sales, I had to let them go. I was like, man, you know, it was one of those things like, what am I doing? Like what am I even enduring here, right? And Ed Garvardas, who heads their growth department and now their head of marketing, came to my booth and how you doing? And, and we just started talking again. He Invited me to dinner and he proposed about a, A, a strategic partnership. And, and how the conversation started was them kind of like taking a, A majority stake on the business.

28:49
Hector Salvidar
And then as the conversation continued to evolve, which took a long time, I'm gonna say, we ended up like, how about, you know, we make it the full deal, the full transaction. And you know, it was something that for us and for my investors, it was a fair. It was a fair. It was a fair deal. You know, I can honestly say that I did not feel that this was, you know, that I had, that I ended up receiving the short end of the stick, nor I'm going to say, you know, I made bank and I'm, you know, ready to retire. Absolutely. But it was just based on how everything started to land. It was a fair deal where I was able to return money to my investors and continue working on Tilupita, which, you know, it's something that.

29:36
Hector Salvidar
Definitely one of the points that I'm the most proud of, that I am giving the opportunity for this amazing brand to continue living and for these products to continue growing and getting to into more households.

29:49
Daniel Scharff
Can you just tell people what Vilore does? I have a sense and yeah, I know Edgar, and I've heard a little bit about it, but, you know, why did it make sense for them? What else are they up to?

29:58
Hector Salvidar
Yeah, Relora is, I like to say that's the commercial subsidiary La Costanya and Jumex, which are two Mexican power brands. You know, I think, you know, La Costanya sells over $1 billion a year and, you know, half of that is in the US Market. And so they handle all the commercial operations from obviously the distribution, consolidation, logistics, sales and marketing. So they're in the business of selling truckloads. Truckloads. Truckloads, truckloads. And, and so they have standing relationship with all category managers and buyers of all major key and key retailers in the United States. So brand wise, they're under the same ownership. Right. There's obviously Humex, Choco Milk, which is a chocolate milk. They have a Mexican jello called Congelli and they also have whatchamacallit, which is also like a snacks.

31:06
Hector Salvidar
And you probably, you know, have them like it's those kind of puffy Puffs, snacks, Mexican snacks. We call it Doritos. Kind of like a flower, chicharron. And so they have that as well. And they're also starting to dab in the. More in the mainstream and natural specialty. So they have Kerns, which is a, A Brand of also natural juices, which is. I think they're more popular here in the west coast in California, I think. Recently acquired Oodwalla less than a year ago. Yeah.

31:37
Daniel Scharff
Oddwallet was kind of a relaunch too, because I think that was out of the market for a while. Then they got the brand and they'll do the distribution.

31:43
Hector Salvidar
Exactly. Completely relaunch new bottling and packaging.

31:48
Daniel Scharff
So they have a lot of Hispanic brands, they have a lot of distribution. And sounds like they're looking for more products to have in their distribution system. Get them on those trucks, you know, definitely ones that'd be a good fit in their portfolio.

32:01
Hector Salvidar
Absolutely. And I think, you know, openly, I think they know that they have this tremendous distribution network, tremendous teams and resources, and they see that Tilupita, we are connecting with. With specific generation of shoppers. Right. That their, you know, legacy brands might not be, you know, connecting quite a bit. Right. And so I think it just makes perfect sense to be able to partner with use our positioning, our. This refresh of Mexican branding so that they can start to expand and bring a different shopper to the set.

32:46
Daniel Scharff
Okay, so time to reflect a little bit. So looking back, like you went on Shark Tank, you know, I know you did a deal with Mr. Wonderful, who always comes in with some sharky deal, right. Where I think you took a deal for like a 500k line of credit.

33:02
Hector Salvidar
Yeah, it was like a hurricane line of credit. And again, you know, hard to negotiate when you're in the Shark Tank. Right. Because, you know, you're just, like, getting blindsided and there's a whole bunch of stuff happening. But what I would like to say and something that it's kind of like fair to disclose, is that there is an opportunity after Shark Tank to kind of like regroup, kind of like and renegotiate kind of like what happens in air. Right. So, you know, we had that opportunity to go back with his team and say, hey, you know, this deal's a little sharky here and how about redo this is that. And so were able to modify the terms of that deal so that it was more. More in the middle of the road than, you know, completely on their side.

33:47
Daniel Scharff
Well, I'm so glad to hear that because honestly, that on at least on the show, I'm like, this is a horseshit deal. And because, you know, you were at, I think, 4 million in revenue at that point, and he negotiated a 500k line of credit, which you have to pay back for 5% equity protected against Dilution? Like what, dude? I mean, I know that they're like characters on a show, so anyways, I'm glad you were able to renegotiate with them.

34:14
Hector Salvidar
Yeah, absolutely. And the key there, going to Shark Tank is trying to get, not necessarily get a deal, trying to get an offer. Right. That's kind of like the. The end result of anyone considering to go into Shark Tank is you want to get an offer because that gives validation of your product, of your business. Right. You know, and if you get the multiple offers, that's even better. And so I was lucky to get an offer and to have sharks that were rooting for me and, you know, trying to help, you know, and negotiate this while I was like a deer in headlights.

34:50
Daniel Scharff
Well, good for you. And what? So just kind of looking back, you know, with, you know, the path that you took and the decisions you made along the way about when to fundraise and when to expand SKUs and when to go for certain retail opportunities and, you know, just kind of seeing how things ended up. Is there anything that you feel like, you know, you would do differently, starting over, advice to brands, kind of going down that fundraising route? Anything you wish you had known going in?

35:18
Hector Salvidar
Yeah, absolutely. I think, you know, in retrospect, I would have paced myself a little bit more on the growth. It's inevitable to get excited, you know, when Target or Walmart or Kroger or Albertsons come to you and say, you know, we want you in and we're going to give you 2,000 stores. You know, it's huge. Is it the right thing to do at the stage you're currently in? And that's what you really need to think about, right. And really be disciplined about it. Right. For me, there was a couple of retailers that we decided to move forward and it was not the right time to go to a thousand stores or even to go at a certain search, even to go to a 500 stores. You have to think of how you're going to activate that.

36:08
Hector Salvidar
And even though you might think you have the greatest product and brand in the world, you still need to get that product in people's hand. We still need to have people to try it and to come back to get more. Right. And so, you know, do you have the funds to support that activation in 500 stores or a thousand stores? And remember that it's not those 500, a thousand stores, but it's also the stores you also have right now. And, you know, all that. So people pay slotting the free fill and they don't think that sometimes that's not payback at all, you know, and that's the whole revenue stream for a lot of retailers is pay me the slotting, I'll bring you in and I kick you out in six to eight months, you know, and then I bring up the next one.

37:01
Hector Salvidar
And so those for me were the key learning. We were super disciplined. In the last year and a half, were super disciplined on saying no to a lot of retailers that wanted to bring us in. But yeah, I for sure made a, made mistakes saying yes to accounts that I shouldn't have. What I would do it is, we're able to do it all over again. I would focus in my market, dominate my market and have that solid base of shoppers in my area where I know that business is already like Clockwork Orange, right? Then it's just like a well oiled machine, right? And understanding once that machine is running on its own, then I can move to the next market, right.

37:44
Hector Salvidar
And not try to crank the machine in my area and also try to crank a machine in Texas and crank a machine in Florida and crank a machine in New York when you're only one person.

37:55
Daniel Scharff
It's great advice. And I'm also not sure that anyone takes it because I hear it all the time and it makes all the sense in the world. But you know what I don't hear very often is people who are like, oh, no, we just said no to Target because we're not ready. So we're gonna tell them no, we're gonna tell Whole Foods no. It's so hard to like make because you think things are going great and no, we're going to make it up and then the velocities are going to grow and we're going to have the money for it.

38:19
Hector Salvidar
And I'm going to say also another thing, Daniel, and the retailer is also shit. I, and I'm sorry if I'm cursing here in the podcast, but the retailer also shit in saying, well, if you say no, we don't know when, when is going to be their next opportunity, right? Like, we don't know when we're going to bring you back. Like, what I like to say is to people asking for recommendations is like, hey, thank you so much for this opportunity. Instead of a thousand stores, can you give me 50, can you give me a hundred? Can you allow me like, you know, to do that? You know, Costco is the same thing. You know, Costco comes and it's like, I'm Going to put you in, you know, 50 clubs.

38:56
Hector Salvidar
Can you really be in 50 clubs and maintain that $901,000 per club per week average when nobody's doing your brand? And so versus.

39:07
Daniel Scharff
And by the way, you're liable if you don't sell the product. Like you gotta.

39:10
Hector Salvidar
Absolutely. Versus, yeah. Versus saying give me 17 clubs instead of doing one demo in 50 clubs, I'm gonna be able to do two or three demos in the 17 clubs. Right.

39:23
Daniel Scharff
I like that a lot. It feels like that's a good way to suss out who truly is rooting for your brand and wants to partner with you versus who's just like, well, whatever, someone's gonna pay me that slotting. And I mean, I, I know because I've been there on the trade show floor and felt it when like a national buyer comes by from a certain chain and they're like, yeah, absolutely, this will go great. This would be a great addition. You're like, you're gonna take my slotting money and churn me out and you don't care and it just like hits your individual bonus. But I know your store doesn't sell that much and like, it doesn't matter to you.

39:57
Daniel Scharff
And you're gonna take me in and chew me up and spit me out and that'll be the end of my brand because I spent all my money. You gotta have your antenna up for those kind of things.

40:06
Hector Salvidar
And I think, Daniel, I think, you know, the unicorn comes once in a generation, right? The catching lightning in the bottle almost never happens, right? And so be realistic. For the most part, only 1% of the brands out there are truly gonna be flying off the shelf with no marketing support or no price promotion or marketing. All the other brands were mortals. And you have to do your regular activations, you have to do the sampling or do the MCVs and TPRs and trying to get those displays. The other lesson I've learned is nobody buys promotions in the center store. When you're promoting, you have to have a display in the store periphery.

40:53
Hector Salvidar
And you know, for that you need to have either a team, a field team or merchandisers or great relationship with a buyer that's going to give you displays, they want displays, they're going to ask you for money for the display. They want the money for the end cap, they want money for the site stack. And for the most part you can't afford those RFA $2,000 in end cap. And so you're doing the TPR, you're doing the MCV on shelf and nobody's buying that promotional, like, on the center store. People that buy center store stuff. These. The people that have the grocery list, and it's like, they're going, you know, I. I need my sugar, I need my bread, I need the cooking powder, whatever. And very hardly is like, oh, this is a great promotion. I'm. I'm glad that I walked through this aisle.

41:39
Hector Salvidar
So it's kind of like that's what happens for the most part for the. With the small brands. Like, oh, I'm gonna keep. I'm gonna keep pr this and that. Yeah. Chances are that TPR is not going to do that. Great. Because you're not going to be in this book.

41:51
Daniel Scharff
That's very interesting. I haven't heard that perspective exactly that way before, but, I mean, that makes sense. And then, you know, just lastly, specifically on the fundraising part, any, like, tactically something you feel like you could have done differently, that would have set you up for more success in terms of, like, when or how you raised or how the deal was structured or anything like that you feel like could be a good tip for brands that are just getting started on their fundraising journey.

42:15
Hector Salvidar
Honestly, on that regard, I leaned into a lot of my advisors and coaches and mentors kind of like structuring the deals and this and that. I think I could have structured better terms in my last round. There were some aggressive side letters there, but it was like, do or die, man. Unfortunately, there's a lot of things, so. And I'm sure you've heard this, but it's like, raise money when you have money. Most of the times is we're raising money where the water is up to here. Right. And so that. Confirm or validate, try to raise money when you have money.

42:48
Daniel Scharff
All right. I think that's very good advice. It definitely sounds right. I feel like, man, people I know who are fundraising, they're always like, I don't know if it's going to happen. It's got to happen, though. And like, always in panic mode about it. And then, yeah, there are those few brands that seem to have no trouble.

43:04
Hector Salvidar
Exactly. They're great. They irradiate confidence also. Like, that's. That's one of the things that, you know, that helps. And they can take a snapshot in time really well and sell that snapshot in time. And.

43:16
Daniel Scharff
Yeah, and it doesn't always last because I've seen those brands also. Then a couple years later, they're out of business because the trend turned out to be a fad. And then the tide turned against them. And then they just, I don't know, they have some money and they kind of run on fumes for a long time and never regain that original glory. So, I don't know, things can change. But I think, you know, the lightning in the bottle comment that you made, I think it's really important because you can't plan for that and it happens to almost nobody. And if you're that brand in that moment, then great. I hope you grow responsibly also. But it just. There's no way to plan for it.

43:50
Daniel Scharff
What you can do is try to plan for, you know, responsible, consistent growth, like doing the right things, the right executions, the right activations to try to grow your brand in a. In a good way. And, you know, it may not make you the sexiest viral sensation overnight, but again, you just. There's not a playbook to plan for that. Some people can make it happen, but it's very infrequent to be able to do that reliably. So, Hector, I want to thank you so much for coming on today and telling us the story. I'm really excited that you'll be continuing on with the brand Tilapita and getting to run that now with that expanded distribution that you guys will have with Valore.

44:30
Daniel Scharff
And yeah, just thank you so much and we'll look forward to seeing you in and around the community and at the trade shows as you guys continue on your path.

44:39
Hector Salvidar
Thank you so much for the invitation and excited to continue the journey. Absolutely.

44:44
Daniel Scharff
All right, great. Thank you so much.

44:46
Hector Salvidar
Bye. Bye.

44:49
Daniel Scharff
All right, everybody, thank you so much for listening to our podcast. If you loved it, I would so appreciate it if you could leave us a review. You could do it right now. If you're an Apple podcast, you can scroll to the bottom of our startup CPG podcast page and click on write a review. Leave your company name in there. I will try to read it out. If you're in Spotify, you can click on about and then the star rating icon. If you are a service provider that would like to appear on the Startup CPG podcast, you can email us at partnershipstartupcpg.com lastly, if you found yourself grooving along to the music, it is my band. You can visit our website and listen to more. It is superfantastics.com thank you everybody. See you next time.