Ep. 172 – LIFEAID Beverage Co. COO, Andy Halliday

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Our guest today is the COO of LIFEAID Beverage Co, Andy Halliday.

Andy is the son of an Air Force B-52 Aircraft Commander and spent his high school years in Tachikawa, Japan, when his father retired from the Air Force to become a 747 Captain for Japan Airlines. He left Japan to go to Dartmouth, graduating and spending six years in the Ski Industry, where he became the Director of Skiing and Guest Services Manager at Sunshine Village outside of Banff, Alberta. He left skiing in 1981 for Harvard Business School and subsequently spent 15 years in the Specialty Chain Store business at an NYSE chain-store conglomerate with 3,500 stores.

Andy learned profit planning across the cycle of business seasons and was given a division Presidency in 1987, where he learned and practiced multi-functional general management disciplines. In 1989, he was made the President of the Entertainment Group, which began with the acquisition of the then-2-store-chain, Dave & Busters.

Later, Andy was offered a position at Disney as an SVP in the Imagineering unit of Disney Development and also a position as SVP of Strategic Development at Simon Property Group, the country’s largest Mall REIT. Andy chose this path to be closer to his sons from a previous marriage, and his role developed into the co-President of Simon Brand Ventures. Sometime later, Andy became the CEO of Contact.com, a network contact management product.

Between 2003 and 2015, Andy became the founder or CEO of 4 startups that together received $18MM in venture funding, including Ourstory.com, TagVault.org, and the student-community mobile app “erodr”. He was also an executive team member of startups like Spoke.com, MerchantCircle.com, and Reply.com. In 2011, Andy met the co-founders of LIFEAID and became an advisor as they sought initial funding and commencement of operations. In 2015, the FITAID brand took off online and in Crossfit Gyms, which he then joined as its COO.

In This Conversation, We Discuss:

• Andy’s experience as a student at Harvard and Dartmouth
• How LIFEAID and FITAID products work as health supplements
• Analyzing the customer experience, and their expectations of your products
• The biggest impact of COVID on the company

Resources:

Connect with Andy Halliday: LinkedIn

LIFEAID Beverage Co – https://www.lifeaidbevco.com

Connect with Cameron: Website | LinkedIn

Get Cameron’s latest book: The Second in Command – Unleash the Power of Your COO

Subscribe to our YouTube channel – Second in Command Podcast on YouTube

Get Cameron’s online course – Invest In Your Leaders

 

The post, Ep. 172 – LIFEAID Beverage Co. COO, Andy Halliday, appeared first on COO Alliance.

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Our guest is the COO of LIFEAID Beverage Company, Andy Halliday. Andy is the son of an Air Force B-52 Aircraft Commander. He spent his high school years in Tachikawa, Japan when his father retired from the Air Force to become a 747 Captain for Japan Airlines. He left Japan to go to Dartmouth, graduating and spending six years in the ski industry where he became the Director of Skiing and Guest Services Manager at Sunshine Village outside of Banff, Alberta. He left skiing in 1981 for Harvard Business School, and subsequently spent fifteen years in the specialty chain store business at a New York Stock Exchange chain store conglomerate with 3,500 stores.

Later between 2003 and 2015, Andy had become the founder or CEO of four startups, which together received $18 million in venture funding, including OurStory.com, TagVault.org, and the student community mobile app, erodr. He was also an executive team member of startups like Spoke.com, MerchantCircle.com, and Reply.com. In 2011, Andy met the Cofounders of LIFEAID, and became an advisor as they sought initial funding and commencement of operations. In 2015, the LIFEAID brand took off online and in CrossFit Gyms where he then joined as COO. Andy, welcome to the Second in Command Podcast.

Thanks for having me.

I didn’t know that you were Canadian or had lived in Banff.

I was a landed immigrant for four years. My first wife was from New Liskeard, Ontario.

That’s amazing. I was from Sudbury. I’ve been to New Liskeard a couple times.

You knew it well.

I think I planted trees up near New Liskeard. I moved to Western Canada because of Banff, Alberta. I went out to Banff in 1979, and it blew my mind.

We were there at the same time, Cameron.

Then I went out and skied around 1981. Was Brewster the name of a run at Sunshine?

Yes, Brewster was the name of the mountain there. It’s called the Great Divide Lift.

There was like a big mogul run on one part of it. I remember that really clearly, and then I remember Lake Louise. I actually got to ski a couple runs with Ken Reid at Lake Louise when I was seventeen years old. I was pretty much in a full talk, and he was free skiing down the hill, but we skied two runs together. He was my idol. It was really cool.

Good. I think this means that we’ll have to find an occasion to go skiing together.

Yes, I’m sure you got out to Fernie BC. Did you ski?

I’ve done all the mountains there at events, instructor trainings, and that sort of thing. I went up to Ski Whistler Blackcomb with some ex-colleagues, or still my colleagues but from the Sunshine Village days.

Please ping me next time. I live part-time in Vancouver, and I used to have a place up in Whistler. That’s why I moved out here. I was just so blown away and growing up in Northern Ontario where you could actually see from the top of the mountain to the bottom. My dad would have a little flag to count us down, and we would tuck to the bottom in eleven seconds.

That’s great.

Anyway, you did your MBA at Harvard?

Yes.

I couldn’t spell Harvard in school. I just wasn’t that guy. What was it like?

It was a wonderful opportunity to read intensely and discuss energetically. Let me just paint a little picture. You throw 80-plus people into an amphitheater classroom. Everybody has to have read the case. The instructor walks in says, “Good morning. Andy Halliday, you start off.” You have to lay out your analysis of the case. You have to be prepared. Everybody is prepared and they all have their own unique position on that.

LIFEAID: Doing an MBA at Harvard was a wonderful opportunity to read intensely and discuss energetically.

Then for an hour plus, there’s a thriving discussion that ensues. You have to be really paying attention and find the opportunity to actually inject, insert something that’s progressive of the discussion. That active listening and that intellectual engagement with a set of problems that everybody has studied carefully overnight. Everybody coming into that room is well-prepared even before they ever arrived at Harvard. They’ve been hand selected in many respects to be capable of engaging in that conversation. I have had no experience like it since.

What a time to be there too. I think the very first business book I ever read was What They Don’t Teach You at Harvard Business School by Mark McCormack.

I missed that book. Tell me what the gaps are please.

This was a long time ago. It was like 40 years ago. I don’t know. It was just like the stuff that they don’t teach you, but I don’t even remember it. I just remember that was the book. Harvard was the preeminent MBA program of its time back then, for sure.

I think Stanford was equally prestigious and focused more on quantitative things. I think if people were really quant jocks, they would have preferred to go to Stanford. Harvard is much more general management in its focus.

Was it Dartmouth College you went to school to for your undergrad?

Yes.

Did you ski race there?

I was on the ski team for one year. I was a good skier, but I wasn’t athletically tiger-like. I was always the guy at the end of the run. There are huge ruts now because everybody else has gone ahead of me. I ended up shifting over to being an instructor at the Dartmouth Ski School. Dartmouth Skiway is its own ski area at Dartmouth. I started out doing the pedagogy of Alpine ski instruction there.

I raced against Dartmouth twice in the Canadian American Championships back in ‘85, ’86, and you guys blew us away. I was in the ruts behind your ruts. What was it like transitioning from an MBA and then into all of these startups that you had the experience with?

I first did a stint in New York Stock Exchange company, as you know, Edison Brothers Stores for fifteen years, so close to fifteen. I’m 12 years there, then subsequently 3 years with Simon Property Group. That was a major transition from the outdoor world, but definitely focused on management. I had significant management responsibilities built for the hotel operations and for the ski school and all these customer-facing, guest-facing, staff on the resort. It was a pretty big resort with 400-plus employees.

Moving from that to basically sitting in an office and working on, I was one of the very first people to get a personal computer in that company. I started to do analysis, and then also developing macro-driven Lotus 1-2-3 programs to actually deliver things to the field. It was both interesting, but it was also a bit of a disappointment in how contained I felt in terms of that transition. That’s one aspect of it. Overall, it was exciting and challenging. It gave me broader responsibilities over a much larger budget, if you will, than I have ever experienced in the ski industry.

Do you think that was your real-world MBA combined with your MBA then when you were there for that fifteen-year period?

No doubt, I really understood after that. I understood the ebb and flow of the seasonality of a business, the importance of things like margin and the business I was in, especially chain store retailing. I had a lot to do then before the advent of systems that would actually track the cost of items. It was using the retail inventory method. Planning for open to buy, using the retail inventory method, and trying to avoid the mistakes that would lead to huge markdowns that would crater your overall contribution margin for that set of stores. That taught you how important it is to keep your hand and your finger on the pulse of what’s going on in the business.

I’ve been making up a data point or a ratio, for lack of a better term, to work with some companies that sell exclusively on Amazon and helping them trying to control their inventory. The number I’ve come up with was you take your gross margin multiplied by the number of inventory turns per year, and it has to come out to 240 or greater. If you have a 60% gross margin, you’ve got to turn it four times to come up with 240. If you’ve got a 30% gross margin, you’ve got to turn it eight times. Do you have any kind of a number like that to optimize the inventory so you’re not sitting on too much?

It depends in part on what the lead time for your supply chain is. In the apparel business and shoe business, all of those things were being manufactured abroad and shipped in. You had to plan for a subsequent season, 6 to 9 months ahead. There, you are really throwing down a bet about what was going to work and what wasn’t going to work.

LIFEAID: You had to plan for a subsequent season, six to nine months ahead. So you are really throwing down a bet about what was going to work and what wasn’t going to work.

On Amazon, first of all, supply chains are much shorter now, even if you’re buying from Asia. Nonetheless, if you have rapid production capabilities or just-in-time supply chain, you don’t have to worry so much about that. It’s dependent on which industry you’re in, I would say. I think that’s how your 240 built later.

It would be interesting to see if you’d test that for me, and I’d love to get your thoughts on it. I’m also curious whether companies are making a mistake or maybe being shortsighted without looking at the data in manufacturing in Asia or in other markets when they have that long lead time, would they be better off maybe paying a little bit more and having a faster turnaround in North America? Any thoughts around that at all?

I haven’t had to face that particular question. LIFEAID Beverage Company does compact. We have canning companies in effect. We use the 12-ounce tin can model, and like many other beverages, we deliver all the raw materials to the co-packers doorstep. They run in very high-volume production lines, the delivery of the cans to pallets, and then those pallets are delivered to our warehouses and we distribute them.

How many co-packers would you work with?

The co-packers we work with are Portland Bottling Company on the West Coast and Big Beverage in North Carolina.

You’ve got two.

Yes. We have another smaller one that does trial runs and small production runs for us when we’re experimenting with different can designs or doing new formulations, that sort of thing but the main volume of production is done by those two co-packers.

I’m familiar with LIFEAID. Can you tell our audience exactly what LIFEAID is? If they’re one of the random four people who haven’t bumped into your product yet.

Good, I hope you’ve seen it. It’s generally available in most every grocery store and around the country and now around the world. Not in grocery stores, but we have distribution in gyms everywhere. We are the functional beverage company. Our lineup is different supplement blends for various use occasions. A good example would be one of our top selling blends. It’s called FITAID.

FITAID is the number one post-workout recovery beverage. It’s the performance and recovery choice of great athletes in CrossFit, the NFL, NBA, NLB. Another example is FOCUSAID. This is a different supplement blend. It’s our Nootropics stack energy drink. It’s a blend of cognitive enhancements plus energy from natural caffeine, green tea, and Yerba Mate. That energy blend aids mental acuity, focus, concentration, memory.

FITAID is the number one post-workout recovery beverage. It’s the performance and recovery choice of great athletes.

By the way, secret tip to everybody out there, all our products are priced the same, but FOCUSAID is the most expensive for us to produce because of the cost of those important compounds that are helpful to the cognition. Specifically, I’ll mention Alpha-GPC for memory and cognition. That’s Alpha Gamma Phosphorylcholine. That’s one of the key compounds that works in your brain cells.

Another is GABA, γ-Aminobutyric acid. That’s stress relief, focus, and clarity. We also add Rhodiola Rosea for concentration, Echinacea, Quercetin, and a dose of American Ginseng for retention of learning. It’s a really amazing set of supplements. By the way, what’s common about all of our products is these are not pixie dust formulations. This is not milligrams. There are several grams of supplements in each one of our formulas.

If anyone hasn’t seen the packaging, it’s always a solid color with white on every can. The word is in red, and then it’s like a dark black or a dark blue, or a dark red or something with white.

That’s generally true. We have a brand new can design that’s out. What’s common about them all is the AID, so FITAID or FOCUSAID or IMMUNITYAID or PARTYAID, which is our post-weekend recovery drink. All of them have AID with a white cross in the D. That AID is in red. That will be the thing that catches your eyes.

That’s how they’ll spot it. For my kids who are going off to university, their PARTYAID will be every-day-of-the-week drink, I would imagine.

Let me mention one of the things, since you’ve brought up kids. Orion Melehan and Aaron Hinde, the Cofounders of the company, came up with the concept for the whole LIFEAID line. Their motivation was that they were sickened by sport and energy drinks that were being marketed to kids and were primarily caffeine and sugar.

They conceived a way of producing something that would be filled with things that are good for you and nothing bad. No artificial sweeteners, no artificial colors, no super lows or aspartame compounds that make for sweetening, but are not good for your body. All of our blends are designed to do that to be a better-for-you drink that can provide you with important supplements and energy when you need it.

Let’s go back to the time in Banff, Alberta when you were doing all that customer facing. Was that hard for you to give that up? Or did you find other ways to stay connected with the customer as you moved into an office, where you weren’t talking to and facing customers so forefront every day?

It was gone to a large degree. My audience changed from being the guests of the resort and being directly visible to them and extended through the staff that were delivering the services directly to them, instead store operations in a chain store with 1,000 stores. As the president, I wasn’t going out to everyone in the stores. I would do store visits for sure. I would do store openings. I would be there, but it was generally off hours. I wasn’t working with customers. I think that there was a gap there. I hadn’t thought about that. Interesting question to pose, but I missed that.

I’m wondering, if it has been part of your DNA now, that need to connect with the customer even though the maybe model is slightly different.

One of the things that I like about eCommerce and a lot of my history has been, since 1998 when I came out to Silicon Valley, it has been involved with eCommerce. That’s a big part of my portfolio. One of the appeals of eCommerce is you have a very direct and immediate feedback loop with the customer, but it’s invisible and ghostly.

One of the appeals of e-commerce is you have a very direct and immediate feedback loop with the customer.

With the exception of the customer service team here at LIFEAID or at an eCommerce company that’s providing other services, the customer service team has engagement directly with consumers. Other than for that, it’s mostly the information systems and the visibility that you gain about the customer behavior there is what’s feeding your interpretation of what the customer’s involvement is. You really have to extend that to focus groups and to observational and research in effect to understand what the customer is experiencing.

To really try to stay connected. Talk to me about what it was like then, you had some roles as CEO. What have been the differences between being a CEO in some of these firms and then being a COO now?

I’ve been a COO a couple of different times prior. Then now, I’ve been the COO at LIFEAID for six years. I would say, the main difference is that the CEO has an encompassing authority and encompassing responsibility for outward-facing presentation. Whereas, the COO is more back office, making sure the trains run on time behind the scenes.

While I was a CEO, I was the front man for the company. I would do all the press. I would be involved in all the events and so on. I’m very un-visible. Not invisible, but I’m un-visible to the customers. Hopefully, the work that I do behind the scenes is really important to supporting both Aaron and Orion as they do their front and outward facing roles and as they focus on the specific functional areas that they’ve chosen to divide between them.

In our case, the CEO is focused on finance and operations plus production, that’s Orion Melehan. Then Aaron Hinde is sales and marketing and customer service. He has got all of those more outwardly facing roles. Both of them together, present very well, as you know, but Aaron is really the one with our main customers, major retailers, major distributors, etc. He would be the one who would be the main face of the company, although Orion is right there. Both of these guys are incredibly articulate and great proponents of our vision and our strategy.

I’ve been in a couple of Mastermind groups and been around Aaron a few times. Was the Mastermind community part of their brand outreach or getting thought leaders, or did I just happen to bump into them and there was product there?

No, it’s really a part of the inception story of LIFEAID. LIFEAID is a different kind of beverage company in its founding because never before had a company really attempted to do something like be an online beverage. Shipping cans of 70% water around the country, would that even work? This is before the advent of free shipping on Amazon. The company was founded in 2011. The company did all of this direct, both to consumers and to gyms early on.

Where that started out was the self-education and the work that these two guys did to develop their own understanding of a business. Business in general was profound and it involved the Mastermind programs that you’re referring to. In that context, they were meeting largely with people who were marketing digital products online, not physical products. They found a way to translate the methods and the mechanisms of that digital marketing machinery and do that for beverages. They grew this business to the point of about $10 million, $12 million by 2014 without any meaningful distribution on store shelves.

It’s all done through small parcel shipments to gyms and to consumers. Let me just brag on them a little bit more. When I first joined the company in 2015, there were just 7 or 8 people. These two were the ones who were managing the online email marketing system. They were creating the campaigns. They were interacting with the customers. They were simultaneously creating the products and development. They did an eCommerce company startup using beverages and that was the platform from which we then extended to retail distribution.

Is that why you joined them because they had already figured out the direct to consumer and they had a brand and they needed your expertise on the retail side?

No, actually, I’ll say it again, my portfolio is eCommerce largely. I was impressed with what they had accomplished and I’ve been an advisor from 2011. They presented to me the concept before they’d ever produced the product. I’d been along for the ride in many ways but there was a big gap in there in between, when they really took off with CrossFit Gyms in 2014.

Then they reached a breaking point on the eCommerce platform that they had developed through a connection of one of the people who was an early participant in the company. That platform was going to crater under the weight of the demands of a growing population of consumers. I came in first as a consultant to help them make a transition to a bigger eCommerce platform and to develop the systems around that. Then it became very clear internally in 2015 that they needed somebody they were going to grow more rapidly than would be supported by their personal conduct of all of those management tasks. They saw the need for somebody to step in and do the work alongside them and so I came in.

One of the things that I recall when we were making the transition to retail, we knew that we were going to find our way into distribution. We were being approached by Whole Foods, for example, in that year. That was a result of one of the buyers in one of the regions of Whole Foods being a CrossFit enthusiast and was a consumer of FITAID in the CrossFit gym and turned to a broker and said, “Why aren’t you presenting me with FITAID? Where are these guys? Get them in here.”

I can recall in our tiny little office that we had at the time, when there were only 7 or 8 of us. I remember us sitting with a whiteboard and I was saying, “What I think is going to be required here is you’re going to have to build out this whole sales and marketing organization. There are going to be all these people who are going to have to be used to do this part of the business. How many is that? Where do we get the money to do that?” That’s what triggered our first efforts to get private equity funding because we knew we had to hire some staff to support that sales and marketing outreach to be built.

You’re in the same approximate geographic area as the CrossFit head offices, aren’t you?

Yes, Santa Cruz. They were founded in Santa Cruz. In fact, the CrossFit Gym that Orion and Aaron both went to is how they met. They also had some other common connections, but they were CrossFit enthusiasts together and they were also great golfers, hence, GolferAid, one of our products.

I remember that one.

We’re interwoven with CrossFit here.

The GolferAid does not help you with your puttings. I think it’s like a false advertising. You guys just raised some money. What was the purpose for this raise and how many rounds have you raised?

I’d say they’re cumulatively maybe four different private equity raises, I should say, that have been done. Our first private equity round was in 2016 with KarpReilly, a very prestigious and top-level consumer products portfolio. Those guys have been great supporters of ours all the way through. This most recent round that we raised was for something in excess of $15 million. There’s some press out there that you can read about it. It was led by one of our other private equity groups, like Cambridge SPG.

Together with a whole host of new investors, KarpReilly and Cambridge SPG have supported us in the transition we’re making right now to play in the big leagues. Right now, we’re in the beverage industry compared to all the energy drinks. Red Bull, Monster, Rockstar, Bang, Alani Nu, those players are at a certain level. If you look at the top half of the energy drink category, we’re at the top of the bottom half in volume and velocity.

We’re in a position to break through and enter into the big leagues with them but that’s a very capital intensive and a very expensive proposition to gain the market awareness and the distribution support in the form of DSD operators out there to deliver to many more locations than you could reach, if you were going simply through major wholesale distribution and/or direct retail as we do to H-E-B, Whole Foods, Walmart, etc.

How many countries are you in currently?

There are a lot of distributors. As I had said, there are 20 different countries that were sold in but most of them are small. We have wholly-owned subsidiaries in Canada, EU, which covers all of the EU. All the countries of the EU are supported by our EU subsidiary and then Australia, New Zealand. Altogether, we have those international companies and those are focused at the moment primarily on the gym market. That’s our route to market as we go into the gyms with our energy drink for athletes, that’s what our entry point is.

We have the other products that are available to them for different use occasions. The number two product, FOCUSAID, is sold in gyms as well. People buy them there or they buy them off the grocery store, not for their workout, not post-workout, but for their workday. It is where you really want to have the FOCUSAID. It’s much better for you in many ways and better for your brain. It’s brain food. The one coffee provides.

That’s the one I’ve been looking for, as well. I got to get off this whole third cup of coffee every day thing and I’ve been looking for the FOCUSAID up in Canada. Let’s talk about focus. What are you focusing on day-to-day in your role as COO?

My interest has largely been in systems. I’ve been involved in eCommerce development, of course, but the platform and the business intelligence systems and the financial reporting systems that work here at LIFEAID are all products that I’ve negotiated and then delivered through our development teams, integrations across all these different components of our system stack. That’s a key part of my responsibility. I have people reporting to me who manage the development team.

We have a really crack PHP and Magento Development Team that does extensive customization. If you look at our website, it’s unlike any other. It’s not like a me-too kind of thing on a standard platform. It’s highly customized, and it’s uniquely suited to this business, which is a combination of direct consumer, direct to wholesalers, like gyms, very small businesses. Some of them are very large. I was looking at an analysis that I did and just looking at the max average volume per month for a set of fitness centers who had just joined us within the last two years.

One of them has an average of nearly $13,000 of purchases from us per month over two years. That’s a very big gym. It can range from a very small operation in the garage. It has a little refrigerator, that’s providing the drinks. We have that business and then we also have the wholesale businesses. We have very distinct businesses and all our systems have to support all of them. It’s been a really wonderful opportunity to apply the experiences that I’ve had prior to designing and implementing and maintaining and managing those. That’s been a focus of mine.

Internally, as far as the internal operations, I’m partnered with Aaron and Orion in the leadership of the company. All the department head meetings and all of the cadence of our goal execution process, all of those things are managed partly by me. I’m the guy who keeps the trains running, make sure all of those meetings ensue.

How many employees do you guys have now?

We have a little over a hundred now.

I’ll tell you, 13,000 a month, your product has either built a real cult following or it’s a front for their cocaine operation. That’s a lot.

It’s the former. It’s a cult following. One of the most satisfying things in the early days was finding out how significant the conversion from trial to continuous purchasing was for consumers.

LIFEAID: One of the most satisfying things in the early days was finding out how significant the conversion from trial to continuous purchasing was for consumers.

I was using your stuff at the Genius Network events, and I was like, “It was constant.” I don’t know whether there’s something in there that made it kind of addictive, but I like the flavor and I like the results. It didn’t have the kind of sugary taste of the Gatorade and certainly not Red Bull, which is disgusting. Your stuff actually worked and tasted good.

Thank you, and it’s not because there’s something addictive. For example, Bang and others have as much as 300 milligrams of caffeine. For someone who isn’t aware of what they’re consuming there, that can be really addictive. Caffeine is an addictive drug. At that level, it’s too much for your system. We have 45 milligrams of caffeine, not 300.

It’s dangerous.

It’s got a little bit of an acuity boost, but it’s not crazy. FOCUSAID, by the way, has 100 milligrams of caffeine. The purpose of FOCUSAID is actually to give you that concentration that comes from the caffeine boost.

You guys, because of COVID, had a shift in your business. We were talking earlier and it was that your couple of main distribution points flipped. Can you speak to that at all?

The biggest impact of COVID on the company was the closure of gyms. In most countries, even now in Europe and in Australia, they’re facing new shutdowns of gyms and other gathering places. It’s been difficult to maintain the gym business. In fact, that business dropped down to about 70% of what we saw in 2019. That’s also a good story. 70% of our volume was retained despite the COVID closings and that 30% on such a large business.

There are thousands and thousands of gyms who sell our product. That 30%, that’s not that big a loss, but it’s also a very big number in terms of sales. It was almost completely overcome by the growth in direct to consumer. There’s this huge buy-in that occurs in March of 2020, where suddenly a whole new host of the direct consumers are coming on as new file customers for us. Then, they show as retained all the way through to the present. There’s been a step function increase in our direct consumer business that is covering over. Between 2019 and 2020, we had about 25% growth. We expect a similar growth this year.

Is your direct-to-consumer business on a higher margin, or does the fact that you’re shipping out the small shipments chew into some of that margin?

It does chew into some of that margin, but it still remains the highest contribution margin channel for us.

How about on the people side of the business? Were you guys a full office-based company prior to COVID or did you have any impact or change there?

Most of our head count is outside the office. We started out with maybe 65 employees total. Of those, maybe 25 were in the home office. The rest of them are in the field. Those people who work remotely and always have, we shifted to all remote work and because of our systems, they did not miss a beat. Everybody is working on SaaS systems now, and with the advent of Zoom meetings, then everything proceeded the pace.

What were all the people that are out in the field working on? Was it a direct sales, marketing?

These are people who are merchandising, in effect. They are Area Sales Managers, primarily the largest headcounts among Area Sales Managers. We have Area Sales Managers almost every important region for our distribution. They go into accounts, they talk to the management, they assist them. We also have field teams that did not work in 2020 that are in demo mode, if you will.

We put up demonstrations of our product, a tent with our logos on it, and we give out free samples. An interesting result from those is that the number one product that is chosen by people who demo all our products, like from the general consumer public, is the most volume product that we sell. That’s the one they like the most.

Which one is that?

That one is called LIFEAID, and it is our supplement blend that’s designed to reduce inflammation based on components that we know have anti-inflammatory properties. One of its primary component supplements is turmeric. You’ll see that on the can when you see it in the stores.

Are they buying that just because that’s your brand name and they think that’s the one they have to point to?

No, just the opposite. We have the lineup of the cans. You can sample every one, and then they say okay. We say, “Which one would you like to buy today? We’re going to give you a coupon to buy that today.”

They go to LIFEAID?

50% off and they pick LIFEAID more than all of the others. That’s the number one choice but that’s probably based on flavor and the idea of turmeric and the other supplements that are in the LIFEAID formulation. I think the opposite is true when you look at our lineup on a grocery shelf. You’ve probably heard of FITAID, you’ve never heard of LIFEAID, and it’s not clear what the purpose of that particular drink is. FOCUSAID is very clear. Immunity is very clear.

It’s interesting. I’m just running through what my gut instinct reaction is, and I would have gone for the LIFEAID as well. It feels like the thing that draws me in. FOCUSAID, I got to wonder why I’m getting it. The PARTYAID, I’m like, “I’m not really hungover.” The GolferAid, I’m like, “I’m not in the golf course.” The FITAID, I’m like, but the LIFEAID just feels like for every occasion all the time. I wonder if there’s anything just even in that. I wonder if you called it like something else aid if people would go for it or if it is the flavoring. I don’t know. It’s weird.

That’s possible. LIFEAID is a daily drinker. You should drink one every day. It’s really good for you, but it doesn’t jump off the shelf. We have programs underway.

It doesn’t jump off the shelf. They like the taste, but it doesn’t go off the shelf as much.

That’s right. I’m just saying that when a customer doesn’t have the opportunity to sample and compare, they don’t select that one over the other ones.

I was wrong then. That’s the opposite.

It’s not leaping off the shelf by itself, but when you do a demo and you offer an explanation for what each of the formulations does and have them sample the products, LIFEAID was the one that got the most choice.

How about on the outsourcing component of the business? You mentioned that you outsourced the manufacturing and distribution in a couple of facilities or three. What else do you outsource?

Not much.

Any direct sales or anything on the marketing side? Is all your marketing in house?

There are a number of resources that we turn to do some of the art and production for our brand. We also have an internal art department that does some of that work. It’s a lot of work for all the many brands that we have and so and so. We do outsource some of that. Beyond that, there’s very little that we put outside of our direct control.

What are the challenges you’re facing right now? Have you had any challenges due to this recent round of funding at all? Does having more money cause any problems?

I can say definitively, no, it doesn’t cause any problems whatever. Having money, especially in a business that is so competitive and where we have such a big opportunity ahead of us, is really essential. There are competitors who are in public at this point, who are raising 10x what we’re raising now in order to play on the field against the big players. Bang, Celsius, Alani Nu, who are really well capitalized as public companies and are really knocking it out of the park.

Having money, especially in a business that is so competitive and where we have such a big opportunity ahead of us, is really essential.

How do you not get sloppy with raising money? How do you not over hire and get a little bit sloppy? I’m not going to say the amount, but you raised a good amount of money in the kind of eight figures range. How do you not get sloppy and waste that?

The founders have always been very careful about the capitalization. We have been extremely capital efficient to date. Even this round is very small dilution of equity in order to get that, given the valuation that we were afforded. There isn’t this, “Spend money at all costs.” It’s really focused on ROI. Where are we going to get a return on the investment? Where is it essential to make investments in businesses that we want to build a motor around? Particularly the gym business, it’s a key business for us. It’s subject to intense competition, but all the players would love to have it as bigger footprint in the gym market as we do.

They’ve got war chess to come after us. We know that there are strategic placements that have to be made. We also know that there is an opportunity for us to make a step function increase in the level of awareness and appeal to the general consuming public out there. Right now, I would say that unprompted awareness of our product is very, very low still and penetration is very low. Some of that money will go towards the determination of what the most capital efficient ways are for us to extend that.

Do you do any private label at all or white labeling where you have your product under the Fit Body brand or the F45? Is there any market?

We’ve had opportunities to do that, but it’s outside our core competence and focus at this point.

I want to go back to the final question. We’ve got to go way back in time because you’ve been around and through the MBAs and the school and everything. If I want to go back to the 22-year-old self and graduating Dartmouth and getting ready to start on your career, what advice would Andy Halliday have for Andy Halliday back then?

When I look back on all of the twists and turns of my life and in my career, what I think about is I didn’t really have a plan. I didn’t have an objective. I was, in some respects, a bit of a dilettante. I took the opportunities that seemed tastiest at the next moment. My advice to my younger self would be, “Don’t worry about what choices you make. Don’t be so focused on making good decisions about your career, but rather make the decisions that you took. Good ones by your effort and your application of your disciplines and your excellence and just make it happen. Leave everything that you approached a bit better than when you found.”

LIFEAID: Don’t worry about what choices you make. D be so focused on making good decisions about your career. Rather, make the decisions you took good ones through your effort, application of your disciplines, and excellence.

It’s funny. My sister was an elite ski racer as well, and that’s been her approach. In ski racing, you get two runs in most of them other than downhill. In your first run, you go balls out and if you finish, great. You get a second run, but you don’t leave anything on the hill. You go for it. In business, she’s just been that way as well, you just give everything to whatever part of your career you’re in, and then that will lead you to your next one instead of worrying about it.

That’s exactly true. Although, my experience in skiing is a little odd because the one professional race that I actually won at Fortress Mountain, I thought I had gone down really slowly. I felt like I had not given it all but it was smooth enough and fast enough that I won the race.

Just that you were in flow. Andy Halliday, the COO for LIFEAID Beverages, I really appreciate the time sharing with us on the Second in Command Podcast.

It’s been a pleasure. Thanks, Cameron.

That was great.

 

 Important Links

• LIFEAID Beverage Company
• OurStory.com
• TagVault.org
• Spoke.com
• MerchantCircle.com
• Reply.com
• What They Don’t Teach You at Harvard Business School
• FITAID
• FOCUSAID
• PARTYAID
• GolferAid

 

About Andy Halliday

The son of an Air Force B-52 Aircraft Commander, I spent my high school years in Tachikawa Japan when my father became a 747 Captain for JAL. After graduation from Dartmouth, I spent 6 years in the Ski Industry, and became the Director of Skiing at Sunshine Village, outside Banff.

In 1981 I went to Harvard Business School, then spent 12 years in Specialty Chain Store Retailing at an NYSE company with 3500 stores. There I learned profit planning, merchandising, and was made a division President with multi-functional general management responsibility. When the company planned an entry into experiential retailing in 1989, I was made the President of the Entertainment Group, which began with the acquisition of a then-2-store-chain called Dave & Busters.