The Month End Podcast

Episode 22: Miguel Leal • Somos

June 28, 2022 Miguel Leal Season 1 Episode 22
The Month End Podcast
Episode 22: Miguel Leal • Somos
Show Notes Transcript

The Month End provides emerging inventory-based brands real life knowledge in the accounting, finance, and operational world. Our guests are not only similar brand founders and owners, but key stakeholders and contributors to the industry. Each episode provides a glimpse into the vast experience and insight from its guest’s unique background in a casual, conversational tone.


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In episode twenty two, Accountfully's CEO and Partner, Brad Ebenhoeh, sits down with Miguel Leal of Somos Foods.  Leal shares his story of bringing healthy, easy-to-prepare, authentic Mexican food and ingredients to a competitive market.  This episode offers detailed insight into market positioning and the importance of relationships in the industry and across the supply chain.


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The Somos Website:  https://www.eatsomos.com/


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Brad Ebenhoeh:

All right, welcome to episode 22 of The Month End Podcast. Today we have Miguel Leal from Somos. He's the Co-Founder and CEO. How you doing today, Miguel?

Miguel Leal:

Hey Brad, thanks for having me.

Brad Ebenhoeh:

I'm very excited about this conversation. First of all very cool brand. Very excited learn about, you know, Somos, but also the journey that you came from, you know, big brands like Kind snacks and things like that, and how you built a brand from nothing, and what your goals and your processes and workflow in your mindset is. So, super excited about that. So, Miguel, let's start off with background about yourself. Where did you come from? What have you done previously? And then what made you want to launch Somos?

Miguel Leal:

Yeah, no, thank you. I was born in Mexico, in Monterrey close to the border. And my family is from a border town from Nuevo Laredo. So a lot, I think of, of where I am, started as a kid going to visit my relatives there, and then crossing to the other side of the border and going to the HEB and Walmart at the Laredo border, and just being mesmerized by the amount of products and, you know, food that didn't exist in Mexico. And even though, you know, I started my career as an engineer, and working in the paper industry, I kind of like I always felt like, I was gonna end up in food. And especially in CPG, from a young age, I was just obsessed, you know, I love going with my parents to show up and buy groceries. And, and I cook and, you know, I think just one thing led to another. I came to the US for my college degree. And then for my graduate degree, my wife was from the Midwest here in the, in the US, and then we just stayed. And I think after that it was easy. Like you said, I started in big food, you know, Pepsi, PepsiCo, and then Dannon. And then I did you know, three high growth brands, you mentioned a couple of them, but in order Kettle, then Kind, then Cholula. And we've had the idea of Somos for many years, and we just thought the timing was perfect to start this company. And, and yeah, I think again, you know, probably I was predestined to be doing this. I don't think I could have connected the dots forward, but now it's very easy to connect them backwards.

Brad Ebenhoeh:

Yeah, definitely makes sense. Now looking back, backwards. So you know, at Kind, at Cholula, you know what was your role at those brands?

Miguel Leal:

Yeah. So, again, I'm an engineer, I started my career in operations, supply chain, procurement. Then after graduate school, I cannot like sound in on the commercial side, I would say I've mostly done marketing. You know at Kettle, Kind, and Cholula I was the CMO, I was the head of marketing there. I did a little bit of innovation and a little bit of sales, sales planning, that's probably one of my favorite jobs that I've had. But yeah, it's been mostly you know, you know, recruiting and assembling a best in class marketing team and then positioning the brand and, and having a good marketing mix that you know, has a good return on investment and does a good job promoting the brand.

Brad Ebenhoeh:

That's awesome. You've done a lot, a lot of things, so very cool. So give us a little background on Somos specifically, what you're selling, what you're doing, where you're selling, and then we will dive into some more details.

Miguel Leal:

Yeah, so our quality natural offering has chips, salsa, rice beans, and plant-based interests like smokey chipotle mushroom and cauliflower tinga. We also have a couple of variations of a Mexican recipe called peacadillo. It is a recipe that is spicy you know taco ground beef is based on but we do it plant-based with pea protein. All these products are meant to be mixed and matched and you can do tacos, nachos, bowls, chilaquiles, tostadas or they can be done by themselves. There is really no right way to eat Somos.

Brad Ebenhoeh:

Awesome, awesome sounds yummy here as I'm taping this around noon Eastern time. All right, so sales channels. So clearly I saw on your website, great brand, great colors by the way. It's very vibrant and popping but why did decided you know direct consumer, are you selling anywhere else? And then why have you decided on your sales channel kind of plan or go to market?

Miguel Leal:

Yeah, we really wanted to start with direct to consumer, you know, the way that we thought about that was that direct to consumer could be a great trial generator engine for the brand. And what we do on direct to consumers is we sell kits. So we put all the ingredients that you need to have a taco, or a chilaquiles, you know, at home, for family of four for under 10 minutes. All of our products are pre-cooked, ready to heat, and we thought, you know, for people doing Taco Tuesday or any night of the week, that would be the easiest. So we launched our beta program in September of last year, just with chips and salsa, mostly friends and family, trying to run water through the pipes, make sure that all the systems were connecting with each other. And then we open it up with 16 different boxes in January. We always thought that we would establish the brand in direct to consumer first, and make sure that everything, you know, we were getting the right feedback, and we were getting the right users and choices. What really surprised us was how much traction we got that at retail. We are gonna be in 4,000 stores, starting next month. We received our first two customers at the end of February that were Sprouts and Kroger. And now, you know, again, we're going to be close to 4,000 stores, including all Albertsons divisions and HEB next month.

Brad Ebenhoeh:

Well, that's awesome. Congrats. So two questions, I'll start with the DTC. Like from a DTC standpoint, as you kind of said, like, you know, Taco Tuesdays and, and people kind of, you know, mixing in Mexican cuisine into their diets. Was there--this is just a kind of general question from my end--was there any like data on like subscription, subscribing, you know, where they get it every two weeks, every week or every month versus, you know, one time buys?

Miguel Leal:

Yeah. So there were a couple of things that surprised us. And we're actually pivoting our business model as a result of that. We definitely designed the business to be subscription. We looked at this trend. And we had been looking at it since I was working at Cholula. People during the pandemic, very interesting, Brad, you know, the amount of consumers three out of four households, during the pandemic, either cook with a Mexican ingredient, or bought Mexican food into their homes, surpassed Italian food as the number one ethnic food in the country last year, and it was this phenomenon of Taco Tuesday of people, you know, figuring out something that they could do that was easy that everybody liked, is just, you know, we didn't feel like there was a good entry point, you know, everything in our opinion, you know, was a little bit clunky, you have to buy you know, the ground beef in one place the taco seasoning in another, then you have to buy the hard shell, you know, like tacos, and none of it was really Mexican, like Tex Mex and Cal Mex did a really good job. And nothing wrong with those two scenes, but we wanted to bring something similar that was authentically Mexican, and maybe more convenient. And also better for you. All of our products are non GMO, clean ingredients, plant-based gluten-free. So we check a lot of boxes on that regard as well. So that's that's how we designed these these direct to consumer kits. And the pivot. What surprised us to answer your question is that most of our orders became people mixing and matching their own meals. Well, what what we are seeing a lot of is consumers buying, you know, the chips, the salsa, and the beans to make chilaquiles, but then they add cheese, and they add a fried egg on top of it. Or making a very easy pollo la plancha recipe where you grill a couple of chicken breasts and then you add our smokey Chipotle mushrooms on top of that. So we see consumers using Somos kind of like, like I said at the beginning there is no right way to use it. And we are pivoting our model to do that. That's you know, that requires a different fulfillment center when you are picking and packing, you know, different recipes, and things like that. So, and the way that we promote it online is also different because instead of having a determined way to do it, we are introducing quick hacks with instead of with celebrity chefs with just like regular people on regular influencers, a lot of people of Mexican descent, that bring you different ideas on how to use the flexibility of Somos is our new highlight in our promotion, and also in our supply chain.

Brad Ebenhoeh:

Gotcha. That'll make sense. Love it. The second question I had around sales, so then how did you position yourself for retail? So you're, you know, clearly getting it in the next 60 days having a lot, you know, 4000 stores? I think you said like, how did you position yourself? How did you attack that space in that that sales channel?

Miguel Leal:

Yeah, I mean, I am not a merchant. What we do really well, is we create delicious products, and beautiful brands. And I think, you know, if you look at Kettle, and maybe especially Kind, and Cholula as well, you know, great products, beautiful packaging, beautiful brand. Great story. If I had, again another pivot, an idea of what I wanted to do, I wanted to create, when I look at the Mexican set in the store, you see, you see two things, you see sometimes a set that has, you know, great authentic Mexican food, but for first generation Hispanics, and you know, it doesn't really sell to the mainstream market. It doesn't have the convenience or the better for you credentials for that set. And sometimes talking to consumers they are, they don't feel comfortable shopping that set. And then you have the opposite when it's integrated. And most of the section is really TexMex or CalMex. And there is very little authentic Mexican representation on that set. So what we wanted to do was to create a Somos billboard, when you can come in and mix and match, you know, two or three pouches, a couple of pouches and salsa, and have a very quick solution that you can confirm for, for a really good price and have a meal for people under 10 minutes. And a delicious meal as well. Unfortunately, you know, again, to my earlier point, I am not a merchant, and you know very hard as a new brand to come and command that space, we've been very fortunate with a couple of accounts that they've given us the opportunity. With others, we've gone to the Mexican set. I'll tell you probably the biggest insight came from one of our retail partners. But when you go to the TexMex section, count the number of taco shells that they have on the section. I counted, you know, I'm here just outside of New York, I counted over 48 different SKUs of taco shells, but nothing to put inside the taco shell. And that was something you know, it's like having the peanut butter aisle with no jelly or with no bread, or having the salsa aisle with no chips, you know, and for a lot of our customers, that's where Somos is coming in. Because now you know, you can mix and match and grow the

Brad Ebenhoeh:

That's fascinating. You know, just to category. say that from just, you know, how I consume or you know, by product you go in and to your point to be very creative because you're like this aisle has this piece of food and that aisle and if you can just visually see the six things that are all complements or 10 different SKUs, you can just mix and match right there makes a lot of sense so interesting on that. All right, I want to move on to the supply chain, kind of you already mentioned you know, the the mix and match and pick and pack different products. Kind of give me a high level of the supply chain because clearly you're dealing you know, with authentic Mexican cuisine, so you know, you're dealing with a foreign country, Mexico versus you know, being in the US so like just kind of high level your supply chain kind of what you're doing, how you're operating from, you know, manufacturing to 3PL and kind of then in from there then we can get into some, you know, successes and some challenges and everything.

Miguel Leal:

Yeah, so I admire a lot, the Cholula brand even before I worked there. When I worked there, I just realized, you know a couple of things that you know to have an authentic Mexican brand, you need to be working with farmers and manufacturers in Mexico. That just, you know, not only gave Cholula a lot of authenticity, but I will tell you the difference between using you know, Mexican peppers versus peppers, you know, from other parts of the of the globe, you know, make a big difference in the taste and in the consumer preference. And when I envision somos, I envision it very similar, that we were going to be able to work with family farms, you know, for example, you know, where we grow a lot of our vegetables, that family is in the fourth generation of growing vegetables in the Queretaro region of Mexico, that we were going to follow also traditional Mexican cooking processes. So for example, our salsas follow a cooking process in which you fire roast the vegetables with the peppers together. And you know, you do get those specs on the you know, from the burn, and that kind of like sweet and acidic taste that comes from the tomatillos, but you also get thickness in the salsa that is very different from the other products in the market, it's almost pure pulp. And that makes a big difference when you put it on your taco. Because the tortilla doesn't get soggy, you know, from the separation of the product. Same thing with our chips, our chips use nixtamalization corn, which is an old Aztec, you know, process of treating the corn, you know, in water overnight, so you get the flavor and all the nutrients of the corn, and then we stone ground that, which makes it a lot thicker than the rest of the products out there. You know, and the same goes for the rice and the beans, and all of our products. So long story short, we had to do these products in Mexico, we have to grow them in Mexico, we have to, you know, cook them in Mexico. And our biggest challenge, you know, was not manufacturing, or sourcing, because Mexicans are very good at cooking. You know, there is a whole industry established around food, there is a culture of food, you know, we have great manufacturing partners and suppliers. In Mexico, the biggest issue was establishing a supply chain that was plant-based, gluten-free, and non-GMO. Because those certifications don't don't really exist in Mexico. And we really, you know, from our background, you know, from the brands that I mentioned, and our vision for Somos we wanted to achieve that. So that became our biggest challenge on how to get that done. You know, rice is non-GMO, I'm sorry, is gluten-free from the source. But sometimes it can get contaminated in transit. And establishing all of those pieces through the supply chain, I think was our biggest challenge last year, as we were, you know, building our portfolio, and it's probably becoming the biggest blessing this year, because we have dedicated supply chains for Somos now.

Brad Ebenhoeh:

Awesome, and then are you managing the, you know, storing warehousing fulfillment in the US or is it in Mexico?

Miguel Leal:

It is in the US. So that is that is something that we learned, but, you know, we have a lot of experience from Cholula manufacturing, in another country and here our head of supply chain, you know, came from Cholula. So she, you know, is a master and, you know, the sourcing, the manufacturing, the distribution, and Mexico, I think it's gonna have a huge benefit, you know, coming out of the last couple of years in manufacturing full, because a lot of times we can get to, let's say, an HEB distribution center in Texas, faster that you can get from California. So, you know, it becomes an advantage we, for a lot of our customers are actually, you know, within one day of delivering the product.

Brad Ebenhoeh:

Gotcha. And I was just gonna ask, like, how did you you know, build a supply chain out and you mentioned you have a full time head of supply chain that comes from the industry and working in the country. So I'm assuming that really helped out in that process. How are you managing inventory, reordering, cash flow, just kind of the working capital aspect of of Somos?

Miguel Leal:

Yeah, I mean, that is, you know, something that we review, you know, probably every month formally with Equilibra, who our partner in Somos. And cashflow from the beginning has been a big priority from us. Something that we've, you know, learned is that terms, you know, in Mexico sometimes are more general than terms in the US. So that has helped us with working capital. But also inventory has been, has been a big piece. A lot of the categories that we have just storing a lot seasonality, storing a lot, the difference in velocities between accounts, you know, is not the same, to get an order, as you know, in a mass merchant reducing grocery than it is in the Midwest versus California. So I think all of these things based on, you know, the experience of our team has been easy to forecast. There's been a couple of surprises, but because of the shelf life of our product, we can err a little bit more on the inventory side, and be able to have, you know, really good fill rates in the high 90s with our, with our customers. So I think the categories are great, because they don't have a ton of seasonality, they do have a lot of variability, by accounts and by regions. But because of the shelf life, you know, it would be very different. Like I remember, when I worked in the yogurt category, you have a product that you have 45 days to consume it from manufacturing. So I think we are just, you know, very blessed with this with these categories.

Brad Ebenhoeh:

Yes, definitely much easier to operate in that world versus the short timeline. A few more kind of general questions. Number one, how did you build out your team? Like, how did you visualize your team, as you know, coming from a bigger brands right to do a start up? Right, an emerging CPG brand? And how, like, how did you identify the specific team members you needed in the specific roles kind of, you know, throughout that process?

Miguel Leal:

Well, I I've always had a blueprint in mind. And, you know, I think, you know, Cholula was a great blueprint, because of all the similarities that I mentioned, we operate in very different categories. So it cannot be the same. We also wanted to, you know, Cholula, fantastic, you know, food service capability. And we have more of a DTC capability outside of retail. But it was always my blueprint, I thought it was a very efficient organization, the way that that was built, but we were starting from scratch, right? Like we you know, Cholula was built over 25 years. So that's where it became opportunistic, more than anything. I think at the beginning, we were very lucky that because, you know, I am involved in the business and Daniel, my partner who is the founder of Kind, he's also co-founder here, we were lucky that we had people that were Cholula alumni, and Kind alumni that wanted to join, that we knew were experienced work great together, had the values that we wanted to do. So, you know, we started with supply chain, finance, and retail sales, because that was the talent that we could get. And, you know, it has always been our point of view that if you can pick up a 10, you should pick up a 10. You know, every hire makes a huge difference in the business. And then, you know, we had an opportunity to complement the rest of the team with head of e-commerce and a head of marketing. And then after that, you know, all those, you know, team members, you know, we're either Kind alumni, or Cholula alumni. So we needed some diversity. And we knew that after that we wanted to hire people with different backgrounds so they can also bring different points of view and you know, at the beginning for the first team, especially in COVID, it was great that all of us had worked together, but now I'm just loving you know, getting people with different backgrounds, even non full, that can help us you know, challenge. You know, the beginning, your blueprint is wrong, the day that you put it together, you have to have people with different backgrounds come in and ask why are we doing this this way? Why don't we do this? A better way, just, you know, has been one of my favorite things of doing the startup.

Brad Ebenhoeh:

Yeah, it's definitely, talent is definitely a finite resource. So like, it's just the power of relationships and being able to, you know, have access to that talent really helps any organization. So, what is your day to day like, look like?

Miguel Leal:

Yeah, so, I do come to the office every day. I like to block time in the morning, I like to block time on Sunday night to prep for the week, and I like to block time in the morning, to go through the day. So it's typically hit the gym at say 6am, get to the office at eight, at eight goe through the whole day, make sure that I'm prepared for anything that comes up. We do have a cadence in the office, depending on the week of the month, we got an all hands meeting on Tuesday, we got our PMO on Thursdays, I tried to split the one on ones with the team to hit, you know, different person every day of the week. So I can be, you know, fully prepared for them. And then, you know, we don't have a big team. So I tried to at least have a one on one with everybody on the team every other week or every month. And a lot of my question is, you know, what can I do today to help you? You know, we just had our team off site a couple of weeks ago. And my number one thing for the team was, what would you do differently if you were CEO of the company, and you'd be amazed, you know how many, I think of the 12 different pieces of advice that I got, were executing on 11 of them. So you know, a lot of time, I think, you know, you are the farthest away from the information. Maybe not necessarily in a startup, but not necessarily right now. But I do try to push a lot of decisions into the team when possible.

Brad Ebenhoeh:

That's awesome. That's very cool. Once you get some feedback, you know, from your team, and, you know, here at Accountfully, we chat a lot about upward feedback. Because in upward communication, it's always like down communication, upstream really is needed across any organization, then you can kind of analyze and identify to how to better support the team, I think it makes a lot of sense. So the last question I had, before we get to the do's and don'ts, what are the kind of two or three KPIs that maybe you're reviewing now across the organization from, you know, finance, operational accounting standpoint, or that you're planning on doing once you get into retail?

Miguel Leal:

You know, I've been, I've been doing this for over 20 years, you know, getting closer to 25 years. And I've always had the same three KPIs which are net sales, gross margin, and share. That has been important, because this is, you know, my first startup or maybe, you know, at least my my first one, in the last 15-20 years, we've been focusing a lot on quality and OFT. The way that I think about it is, if a retailer is willing to give us a space in the shelf, we want to make sure out of the bat, we're the top, you know, 10 percentile of service, and on the top three of velocities. And if we are not doing it, then you know, we just need to go back and, and make sure that we get it done. But, you know, when we have when we are reviewing our progress, you know, in big picture, it's always are we growing our net sales, which you know, right now, it's easy, because it's our first year, are we growing faster than our competitors? And are we improving our our gross margin? I think you know, in food, if you have a product that tastes great, and people try it, and they repeat the purchase, and you have a good gross margin, then you can make a good business. If people are not buying you back, and you don't make money when they buy you back, then you better do something else.

Brad Ebenhoeh:

Ya know, it kind of gets relatively basic of

just:

is this a sustainable model? Like once you just kind of look at a couple of those, those numbers. So net sales, gross margin, and share. Right? Awesome. All right. So for the the other CPG kind of brand owners that are listening to here, you know, as we finalize this conversation, asking you kind of two specific questions that we ask everybody number one, what is one CPG industry do for the listeners out there?

Miguel Leal:

Yeah, so I think you know, I like to talk to a lot of other founders, you know, most of the, for my benefit, but, you know, this this industry is is very collaborative, you know, I feel, you know, all, you know, all the, I'm gonna call it little guys, I might be the smallest one but you know, let's say it all the brands under 50 million in sales, we love helping each other out. And the pieces that I can that I have more experienced than than my fellow founders, which is, you know, probably on the marketing and sales and commercial side is a lot separating the decisions versus growing the brand and growing the business. Like I see a lot of fellow founders doing a fantastic job growing the brand, being out there spending money in marketing, but then, you know, when you look at the business, the business still needs a lot of love in distribution, or needs a lot of love on margin, you know, like you and I were just discussing, and you cannot need to do both of them at the same time. On the other side, I see businesses that are fantastic to have great repeat rates, great margins, you know, great themes, but are not promoting the brand enough. So I think, you know, when you give yourself as a founder, or as a CEO, you know, your rating, you know, separating it on those two sides, I think, especially in food is super important. And the brands that do it great, you know, the Kinds of the world, you know, really separate themselves from the others.

Brad Ebenhoeh:

Yeah, what about the industry don't.

Miguel Leal:

And the don't, this probably like, half of the feedback that I give to other founders or other companies that I've invested in is to use the right marketing mix for the distribution that you have. So, what do I mean for that, I see these mistakes done over and over again. We have a tendency to spend a lot of time looking at our competitors, you know, what are our competitors doing and if they are doing this, then if they are doing TV, I should be on TV, if they are on Facebook, I should be on Facebook, if they are doing influencer, I should be doing influencer. And to make this very simple if you're only in 10% of a store, so roughly the universe between mass grocery and natural is 25 to 30,000 stores, if you only have 2,000 stores and during 10% of distribution, awareness tactics are not going to work out especially when they are national. Why because nine out of 10 people that listen to it is going to be wasted on you. What works great when you have a small distribution, the store, building displays, doing sampling if you have a product of immediate consumption that can be sampled, doing geo targeting, you know around your stores like that is what is going to give you the highest ROI. And I don't know if I did a quick math I think you know 25% of companies, one out of every four do it right. And understand that piece. How you should be moving your marketing mix, depending on the distribution that you have.

Brad Ebenhoeh:

That's awesome information makes makes a ton of sense. Well, this was a great chat, Miguel, I really appreciate it. Loved learning more about you know you, your background and kind of how you're running Somos and very appreciative of your time. Can you give us a little info on where we can go find your your products where we can buy them again, just so the listeners can check it out?

Miguel Leal:

Yeah, absolutely. So we're currently in Sprouts, Harmons, Kroger, Meijer, and HEB and Albertsons next month. And we are also available on Amazon, or you can buy our kits at eatsomos.com. And you can also follow us on social media @eatsomos for more information and our store locator is coming up soon as well.

Brad Ebenhoeh:

Awesome. Again, thanks so much for the conversation Miguel. So again, episode 22 of The Month End: Miguel Leal from Somos. Hope you all enjoyed the information and we'll chat soon. Bye, Miguel.