Transcript

00:00 I had people saying, "You really want to sell meat snacks for a living?". We were passionate about it, though, and we had the conviction that this was going to work. This is Pete Maldonado, co-founder of Chomps, a key player in the meat snacks category. I've always had a love for meat sticks. I used to ride my bike up to the local 7-Eleven when I was a kid, buy a bunch of them, and by the time I got home, I had finished all of them. But when I got older, I realized that those meat sticks weren't good for me. I shouldn't be eating those. So the idea is kind of quickly came to me, you know, why is nobody making a better for you version for this? The global meat snacks market -- that's jerky, sausages and sticks -- was valued at $17 billion in 2023 and is expected to reach $26 billion by 2030. Bothered by the state of the market in 2012, Pete and his friend Rashid used their own money to start a side hustle, determined to make a healthier for you alternative. As you walk up and down these aisles in a normal grocery store and you're looking at these products, they're loaded with sugar, preservatives, a bunch of unnecessary ingredients that really struck a nerve for both of us. There are three numbers to look out for in this story: $6,500, the amount of money needed to launch the brand's first production run; $244 million, the company's retail sales for 2023; and over 350 million, the total number of sticks sold from 2012 to 2023.

01:26 We wanted to remove the sugar, we wanted to use grass fed and grass finished. We made something that tasted so much better and was a better nutritional product for us. This is Founder Effect. A certified personal trainer at the age of 19, Pete was always looking for a solution to help his clients stick to their meal plans. They were very busy professionals, and I would spend a lot of time putting together these elaborate meal plans and grocery lists, and they never stuck to him. Pete originally started Frozen Fitness in 2006, a company specializing in prepared meals. So, I ran that company for about three years, had some unfortunate missteps, and eventually had to close the company down. A few years later, at a chance meeting, Pete struck up a conversation with Rashid Ali about a new idea for a business in the health food sector. I think we called or text the next day and met up and I said, you know, hey, would you want a partner? He was excited about the idea. At the time, Pete and Rashid's original concept for Chomps was a little different than it is today. The idea was really to start shipping. Frozen meat all over the country. It's actually how the business originally started with the two of us, but we quickly pivoted. That's when Pete had the idea around, well, I used to eat these gas station.

02:41 Snack sticks all the time. Could we make a cleaner version? It could be shelf stable. It would be more portable and convenient. I thought it was a fantastic idea. At the time, CrossFit, paleo, keto were really starting to gain momentum, and this product leaned perfectly into those communities. There really weren't a lot of great grass fed beef meat snack products, especially ones that had no sugar added to it. We had the conviction that this was going to work. Pete and Rashid wanted their products to be different than other meat snacks at the time, one free of sugar and with grass fed and finished beef.

03:16 Their next challenge was figuring out how to concoct the correct formula. The initial formula for Chomps was made in partnership with one of our co-manufacturers. It was a very tough product to make, so a lot of manufacturers didn't want to deal with it. They wanted to do the old way of approaching it, where they could make sure that the product would turn out exactly the same every time. Collectively, we came up with a winning recipe that is very similar to our original beef recipe we have today. Next, the pair had to find a suitable location to source their beef from. The difficulty in that was finding somewhere they could source from reliably year-round. As we started to think about other sources, we looked around the world and we landed on Australia, but more specifically Tasmania, which is off the southern tip of Australia, and we found that the geography is perfect for raising grass fed cattle year-round. It creates a lot of complications in our supply chain. If you just think about the distance that that protein has to travel right now, it's really the best source that we've been able to find globally. After finding the correct formula and co-manufacturer, Chomps was officially born in 2012.

04:21 For initial funding, Pete and Rashid together put forth $6,500 of their own money. The initial $6,500 that we invested into the business went into samples, so we did our first very small production run. We built a website, and then we also did some Facebook ads. I had to teach myself how to create a website. I bought a $99 Photoshop Elements subscription and taught myself how to make packaging. It is not the packaging that you see today. It was terrible looking. It actually had like cowhide print on it. It was just Rashid and me and we were both running it as a side hustle. This business was supposed to be and run as a D2C, e-commerce like store, and we were going to be able to do this on the side. Chomps frequently sold out of product in the first few years of business. At launch, the price was around $2 a stick. Today it's around $2.49. In the early years, Chomps sold directly to consumers, but also to CrossFit gyms, independent specialty stores, chiropractors and doctors offices. A lot of it, we didn't even have product for it anymore because we sold through it so quickly. We we kept the ads up and people were transacting, and then we would reach out to them and say, thank you so much for your purchase. We ran out of product. We'd love to send it to you after if you'll wait for it. Or we can just refund your money.

05:41 2013 was our first full year of business, and we did somewhere around like 40 or $50,000. Then in 2014, we did about $100,000, and then we kept doubling from there up until 2016, where we ten-x'd the business. So we went from about $450,000 to 4.3 million. 2016 marked a pivotal year for the business, as Trader Joe's started selling their product in their stores. That was our very first retailer, and that was really just a game changer for the business. How many millions of customers were now seeing the product for the first time and trying the product? The added visibility from Trader Joe's would present new challenges for Pete and Rashid. When you grow that quickly, it blows up your existing infrastructure. It blows up everything that you were doing historically, and you have to think about the business completely differently, and it forced us to do that. And that was another challenge to figure out, like, how am I present in these manufacturing runs but also juggle my full time job? I went full-time in 2016 immediately after landing the Trader Joe's business, and then Rashid went full-time in 2018. We opened a Chicago office. We started hiring people. That's when we realized that, you know, Pete and I have to delegate. We have to think about culture.

06:50 We have to think about how do we scale beyond ourselves to make sure that we continue to grow this business? In addition to being a healthy alternative, ethical sourcing practices have been important to Chomps since inception. We want to make sure that the things that we're doing in our sourcing practices are not only good for nutrition, it's good for the environment, and it's good for animal welfare. These are the three main pillars of sourcing that we think about every day. Those ideas were what we had when we started the business and hasn't changed since.In 2021, after bootstrapping the company for a decade, Chomps secured its first funding round -- an $80 million minority investment from a private equity firm named Stride Consumer Partners. In recent years, Chomps has experienced significant growth, resulting in the company bringing in nearly $250 million in retail sales in 2023. For Pete and Rashid, Chomps' success is also in part due to its commitment to inclusivity and its accessibility to consumers not already familiar with meat snacks. What we realized in the last several years is our success is being driven through incrementality to the jerky set. The Chomps consumer isn't necessarily eating Chomps because it's a better jerky alternative. They're eating it because it's a high-protein, low-sugar, tasty, convenient snack. Key life moments have also reinforced the core principles of what Pete and Rashid initially set out to accomplish with the Chomps brand. Once Pete and I both had kids and started to grow our families, that side hustle really changed more into a mission.

08:24 It's like someone turned a light switch on for us. You start scrutinizing labels in a much different way than you ever have, even when you're eating foods for yourself. That's how it happened for me. It's how it happened for him. When you're looking at these products that are made for kids, they're loaded with sugar, preservatives, with a bunch of unnecessary ingredients. But on the packaging, it looks like a healthy organic type product with cute cartoon characters and obviously marketed towards kids. From its start in 2012 to 2023, Chomps has sold more than 350 million sticks in 2024 alone. They estimate that they are on track to sell 300 million more sticks. When you find a product that's tasty, that's convenient, you really build an emotional connection. I think that's what Chomps has done. And, you know, Pete and I still run the business like. It's $100,000 business. Running a food business. A snack business is a challenge. You know, I describe it as a house of cards. Like anything could happen at any point. And, you know, you could plateau or you could start losing market shares. It's funny, if you look at the revenue and the trajectory of the brand, when I say someone turned a light switch on, it's literally like a hockey stick trajectory, and it's literally just the two of us. We've got this burning desire now where we are going to make a huge difference in snacking, and that's what we're here to do.