Squeezing Success: Yanni Hufnagel's Lemon Perfect Journey

Jake Aaron Villarreal: Welcome to our podcast, From the Ground Up, where interview startup founders exploring their journeys, their challenges, success and lessons learned. We hope you'd be inspired in discovering what it takes to build a thriving startup. I'm your host, Jake Aaron Villarreal, and here, excited to have with us today Yanni Hufnagel, the creator of Lemon Perfect, the organic lemon water that's raised $99 million in funding and has investors like Beyonce. Very excited about what they're building. Yanni, welcome to the show.

Yanni Hufnagel: Jake, thank you so much for having me on. I'm thrilled to be with you.

Jake Aaron Villarreal: Well great. So we'll dive into your company and there's a lot to talk about here. Um you know, I actually tried your product, Lemon Perfect, and you describe it as a delicious, refreshing, flavored lemon water with zero sugar and no artificial flavors or sweeteners. Uh I experienced it as an incredible drink. And I love water, I make my own lemon water, I gotta tell you I think I've switched to your product. And I'll tell you why: first and foremost, it is refreshing. Second of all, it's got a little bit different purpose and mission behind it which I feel good about, as well as drinking it, and we'll dive into that too. But at the end of the day, you've raised $99 million, you got 300 investors, some of the likes of Beyonce and many others, and you're building an incredible company. Before we dive in about your company, tell me a little bit about, about you. Where are you from and how did you get into entrepreneurialism?

Yanni Hufnagel: Well, Jake, your enthusiasm for Lemon Perfect is, is more meaningful than you can imagine. And, and we've heard that over and over again, and more so over the last months and years than the early years for sure, right, as we've started to really scale the business. Um so thank you for that. I'm from uh Scarsdale, New York in Westchester County. Grew up in, in, in New York and um went to school at, at Cornell. Um I was a student manager for the men's basketball team and that, that led to my early career journey, which was coaching college basketball right. So I, I uh spent time uh at the then New Jersey Nets uh as the special assistant to then head coach Lawrence Frank, who's now the President of Basketball Operations for the Los Angeles Clippers. Uh so um very fun to see what, what [he] has been able to do over the course of his career, but uh worked directly for him as an intern.

Uh from there I got a chance to become a graduate assistant coach at Oklahoma. Um Oklahoma to Harvard for four years as an assistant coach. Uh, uh Vanderbilt for a year, Cal Berkeley for two years, and then my last stop I was at the University of Nevada in Reno. And, and uh the short story is I was on a recruiting trip um to Santa Rosa Junior College. And on the way from Reno to Santa Rosa you pass by Petaluma towards the end of the trip, and I saw a little strip mall with a Starbucks. I stopped to get an iced coffee. And in that strip mall there was this GNC-like sports nutrition store. Uh and the man working behind the register saw a polo just like this, it said "Nevada Basketball" and he said, "Do you work for the team?" I said, "Yes, I'm an assistant coach." He said, "My God, my dream is to be a strength and conditioning coach for an NBA basketball team" right, imagine that! And said, "Matt, here's my card. If I can ever be helpful, please you know call, email, text."

And about a month later he sent me a draft of a book that he was working on, on the ketogenic diet, right, right when keto started to, to become more and more relevant in the psychology of the American consumer. And, and in the back of Matt's book were all these sample meal plans. And every day started by drinking organic lemon water. And uh we can get into uh the story that unfolded from there, right. But uh I said I'm in, A through Z. And lemon water in the morning became a, just a part of my, my daily routine right. But I hated it, right. Buy organic lemons, cut the lemons, squeeze the lemon juice all over, bland taste. I mean, most mornings I threw my hands up in the air! But I stuck with it. And um I'm in the locker room towards the end of our season and uh our head coach at the time Eric Musselman, his wife uh, her sister was on the field marketing team at Bai, um which is uh now one of our biggest competitors. At the time it was you know the darling of the flavor enhanced water category. Um and I, I'm in the, the, the video room actually, and, and our players and coaches are drinking Bai, Vitaminwater, Gatorade. And I said, "Hold on. Can we take organic lemon water and make it taste good?" And Jake, that was the seed of the journey. Who knew you know that we'd be a $50 million revenue business uh you know five years later? Um but uh, but I'm really excited about where we are today, today. And, and it's been a painful road to get here, I can assure you of that, uh but that's how the journey started.

So from New York uh with several stops to Reno in between. And then uh um you know a few weeks after the season um I was having lunch with a friend in Santa Monica, California. I said "John, what do you think about this, this idea?" And uh John said, "I love it. Anything that you can build..." (John was in venture capital), he said, "Anything that you can build that can capture a piece of someone's daily routine... what they do in the morning when they first get up, what they do at night when they go to sleep, or any point in between... is worth going for." And Jake, that, I jumped up at the table, I said "Let's go for it!" And that night from his couch in Santa Monica, I Googled "how to start a beverage company". And now here we are.

Jake Aaron Villarreal: You know it's amazing. Um starting companies is not easy. You have to find the right product, the right market, you got to get investors. You had the brain, you had the right interest, and a listening voice from an investor from the beginning, which is always I think good to start with, just so you have a, a pragmatic listener who can say, "Yeah, that makes sense," or "Maybe that doesn't make sense." Beverages you know, there's a lot of competition in the market as we all know, and many different options. As we talked about briefly you know, I was in a fraternity in college and you know my fraternity brother was the CEO of Rockstar Energy Drink. And I saw it from the inception to 20 years later where he just sold the company for $4 billion. And I know that it's most likely an up and down experience in terms of growth and everything that goes in into building a company with a product like that. But with yours, uh I, I love it's not just the taste, but there's, there's, there's a mission behind it. And I know we'll get into some of the ups and downs of running the business, but talk a little bit about the mission. Because I think that it would be good for listeners to hear why you're doing what you do.

Yanni Hufnagel: Yeah, you know, and, and our mission is ever-evolving right? And, and, and I think for me um you know, I talk about mission maybe a little bit more broadly. I talk about sprinting down three roads, that's my mission, part of that is the company's mission. But, but for me, one is, is return on capital for our shareholders right. Like that, that is a major priority for me when I wake up in the morning, right. Um two is, I'm on a mission to be a trampoline of growth for our people, right. I want our people to aim higher every day, every week, every month, every year. For most of our team this won't be their last stop, right. And so how do I, how do I energize our people on a path of, of opportunity and, and, and growth every day? And then the third you know road that I sprint down is, is can we disrupt the way that America and beyond drinks water? Can we put the best tasting, best for you product on the shelf into the hands of everyone everywhere at any time, right, and beyond?

And the idea of, of taking millions of pounds of sugar you know out of the American diet um and doing it in a way that tastes good so you don't have to give anything up right... build a great company behind all that, be an engine of growth for your people in their personal and professional careers and lives... like, how magical is that? And so, so you know the mission is not just one sentence for me right. Yes, we want to you know reimagine the way that America drinks water. We want to make bottled water perfect. Sure, right. We want to do it in a uh a more sustainable way than's ever been done before, right. We have certain things that we've done here like you know, being the first plastic neutral uh water or flavored water brand right. How awesome is that? Um my mission is broader and it really is the opportunity uh uh to, to be on this, this singular journey um... intense journey of, of, of sprinting down those three roads uh. Return on capital for our investors in a big way right. In a big way. We want 10x, 15x, 20x, 50x returns, we dream big. Um trampoline of growth for our people. Yellow trampoline right, if you can actually imagine it, right? We're on this yellow trampoline of growth. And then the third one. And, and you know, is it a little bit more meaningful than maybe the... like the chance to actually change the health of the American consumer through Lemon Perfect right? Um that's a, that's an incredible, incredible opportunity that we get to wake up and, and go chase every day.

Jake Aaron Villarreal: Well you say you know, you've got a team now of about 84 uh people working for the company remotely, distributed um and a lot of them are bleeding yellow, the color of your brand and, and ultimately part of your culture. Um when you build a company, to start with it's, it's hard to do. But when you build it remotely with a tangible product and then you distribute it, what's the process like for you of keeping everyone on mission? Keeping everyone moving in the right direction, inspiring and leading? Because we're in a different world today where it's not just about being a leader, it's also about being a leader with technology, remote technology like we're on today, and being able to still have that impact and influence on your people to keep them motivated. What are the things that you learned, some insights that you maybe could share with other listeners that are building companies remotely that's worked for you?

Yanni Hufnagel: Well you know number one is I interview every person that uh uh is, is uh applying or through the process of, of working at Lemon Perfect, right. So I have a relationship from day one. And we have 84 people today. We have a plan to be 120 at the end of, of, of 2024. Right, we, we want to continue to you know, as, as the business uh scales, so too will our, will our, you know, the total number of teammates that we have here. But the relationship starts at, with me as our COO uh CEO on day one right. And so that helps build a connectivity that, and a familiarity right Jake. And, and, and look, we come together often as a leadership team, as an executive leadership team, as a leadership team, as an entire organization. We have a bi-weekly all-hands. And there are people... I mean we're on Zoom but we're flying around the room! I mean there is more energy in that hour than maybe any hour of the week, right? And so we call it CE, we actually have t-shirts, Constant Communication, Elite Energy. And we prioritize that across Lemon Perfect. Our communication, best in industry. I think our energy, best in any industry right? And, and so, so that's the, the, the bedrock of how we're building Lemon Perfect, even though our sales team is fully distributed. Now I'm in our headquarters here in Atlanta. We have 15 of our 84 people here. So some of our marketing, finance, supply chain people and talent sits here. Um nonetheless I would argue that from a, from a remote perspective, we do a lot... like our Slack, you know our companywide Slack channel all day boom boom boom boom boom with great retail execution, field execution, uh other stories right. We're a big Zoom organization. Um we don't get bogged down by meetings, we, we, we don't have a lot on the calendar like recurring meetings, but we come together when needed. Um and you know for me it's, "let's go set the strategy and then I got to get out of the way and let our group go execute and have some fun doing it."

Jake Aaron Villarreal: I like, I want to go back to where you said you interview everybody. I mean 84 people, that's a lot of interviews! And I'm sure that's not just the first conversation you're done with that person, I'm sure there's multiple times you're talking to anybody that joins the company. You know it's, it's uh, I think it's a good practice to do that. You know we talk to some founders, they, they in-person, personally interview and hire their first people, doesn't matter what type of industry they're in. They're very involved in it. Uh there's some founders, it might be a bit much, but actually interviewed the first 500 hires.

Yanni Hufnagel: Wow.

Jake Aaron Villarreal: And you're talking about you know, companies that are well established into the hundreds of millions or billions of dollars and are still doing that. Uh so it is important, people are the magic behind a company in a lot of ways. Um you were in a different industry for this, which was in sports and NCAA basketball, and had a reputation of being one of the most dogged recruiters in America. What was it that you learned then that translated to how you hire your own people today at your own company?

Yanni Hufnagel: You know, within the first 5 or 10 minutes of watching a high school basketball player, or a Zoom interview, or an in-person interview here at Lemon Perfect, you get a feel. Like you know, right. Like you can evaluate motor, you can evaluate energy and enthusiasm, you can evaluate talent. You know for me, um the, the, the skills of, of you know being a great basketball player and being a great salesperson or a great marketer or, or even working in our supply chain or finance verticals, it's all about what is your, what is your you know, priority of understanding that it's a scoreboard endeavor, right? Are you a winner? Like I can, when I was recruiting, you know we, we, we, you know, look, if you had a smooth jump shot right, or could rebound the hell out of the basketball, that put you in a, in a great you know kind of starting position. But at the end of the day, were you a winner right? Did you compete at a high level? Were you a great teammate? For Lemon Perfect, it's the same. Will you... in, we, we call it "sprint, rest" here at Lemon Perfect right. We, we want all of our people to sprint hard and then take a breath, rest, double down on the time you spend with those that you love and those that love you, right. Sprint, rest. But when you're sprinting, I want, I want our people to have an unrelenting will to win. Unrelenting will to win! We're such an underdog. When we wake up every day, our people have to have that drive, the, the determination to continue to you know wake up and attack after getting punched in the mouth, punched in the stomach right. Like it's a hard game.

And, and, and so I think there's correlation in what I was looking for coaching college basketball as a recruiter and then you know what I'm looking for here. And it all really starts with, with how focused are you on, on winning? How committed are you to winning? What kind of teammate are you? Um and you can assess that I think very, very early on. As we've added executives here, there's a certainly a larger diligence process and cycle. Um but man it's, it's, you got to have, you got to have the feel. And um that's given me I think a leg up in, in, in this journey, in that you know there's such a correlation between coaching sports especially at a high level like, like Division One college basketball and then going to try to build a billion dollar business uh in something that's you know as sales focused on the front end uh as beverage, emerging beverage.

Jake Aaron Villarreal: Yeah that's really cool to hear that, and exciting to know that it's translatable. Recruiting is recruiting, whether it's for a team, whether it's for a company. You have to understand the person, um what, where their mindset is, and also your gut will tell you a lot too. You know, does this person have the right energy level? Are they positive or negative? Do I feel like they can be a future part of the company? Could I see myself working for them? That's a question I always like to ask when I talk to people. Do they have potential? Even if they're young today, when they get older, could I see myself potentially working for that person? And if the answer is yes, then they keep moving forward down the process. When you...

Yanni Hufnagel: See that Jake, I like that! I like that a lot. That's, that's a great... you know, I never actually thought about that and that's, it's really smart. I, I'm gonna, I'm gonna take that and use it as I continue to you know meet more people on this, on this journey.

Jake Aaron Villarreal: Yeah, it's been the secret sauce for us as we built our company, because it is remote uh internationally as well as locally in the US. And you know, skill is one area, but being able to sit down and talk and want to feel like you can hang out, but also do you respect them? Because who you're working with, if they're going to be in front of somebody that is a client or potentially other employees, could you see yourself wanting to be you know collaborating with them? Or just having that value translate to whoever you're working with? Because they really become um part of you and part of your company you know, they're representing you. So those are, those are things that we look at. Um and that wasn't my idea by the way, stole it from I think Zuckerberg or somebody else, it's a lot higher than me.

Um but you know one area as you build a company and um it is starting to innovate a product that's different than the market, and then also marketing that product maybe differently than the rest. Walk us through a little bit about how you got started. You came up with the idea, and then how did you go from point A to point B to get that product you know with a label on it, with a good product taste that you liked, and then ultimately getting it into the shelves of stores? Walk us through that, that aren't in your sector, what that, what's that, what that process was like for you.

Yanni Hufnagel: Well it was a painful one, right? Uh and with a lot of false starts. Uh look, the, the, the first thing that, that we, we did or I did was, was come up with a name right? And I think you know, I, I, I'm not sure if there's anything more important in the entrepreneurial journey than the name of your business, right? Especially in something that is, that's a consumer brand right, that's going to be front-facing, that's going to have to draw people in. Uh uh what will drive the trial? What can drive awareness? What, what is a simplification of the product itself but yet cool, right? Uh so, so that took some time. Um I actually uh I registered the domain name June 13, 2017 on a street corner in Paris. My dad is from France and I was there with my, my mom and dad. I didn't get a chance to go to France that many times when I was coaching college basketball just because of the, the, the season calendar, the recruiting calendar. This was when I got out of college basketball, I made the decision to take a year and go see where we could go with Lemon Perfect, with this idea. Uh it allowed me to have a little bit more control over my calendar right. And that's actually been a freedom that I have to this day, which is I think maybe more than anything else one of the, the, the great parts of being an entrepreneur, one, one of the great pluses of being an entrepreneur is the freedom of, of calendar.

But anyway, we get the, the, the, the started with the name. And then um I said "Okay, well we've got to go figure out how, what's, what's, how are we going to make the formula right? What, what, that's the next step." And, and so uh my search led me to a beverage formulator in, in, in Lexington, Kentucky. And this is my first, you know, this was a Google search. And, and Jake, I, I went in there... you know when I was recruiting I would go into a, a home with the recruit and the mom and the dad, the aunt, the uncle, whoever was in there. And I'd come in with this big like you know 36 by 20 poster board with why they should come to you know Vanderbilt or, or Nevada or Harvard or... And, and, and uh so I did the same thing here. So I walked into this, this, this beverage formulator and I was so sure that we had the next billion dollar idea that I did not sign the NDA before I got there. So I said "Okay, I'm listen, I'm coming, we're going to sign the NDA in the room, and then I'll tell you the idea." And I got in a suit and tie, I didn't know anything else right. I and I wanted to make a great first impression. I go in there, I sign the NDA, I tell them the idea. And they said, "We're very sorry, we don't do anything with real juice." And so not, not even day two, right. And I felt like my God, I don't think I can do this right. Uh I just remember, it was, it was right before July 4th, and, and I'm flying out of Cincinnati Airport. Uh there's a, an Outback Steakhouse right when you go through security uh at Cincinnati Airport. And, and I was at a little one or two top and I was crying to my mom. I said, "What did I do here? I, I, I don't, how, I don't know what I'm doing!" right? And that was the first moment of "hey let's persevere right. Like let's keep going."

The next week, called a, a beverage formulator um and uh um... another moment of, of luck in this journey. So little did I know that, that, that beverage formulator, the, the two managing directors were going through a [split] and in essence every call that came in went one way or the other, right. My call goes to Marty Molina and his team. And uh Marty uh left about 6 months later, went to go build his own uh uh flavor um lab, Ocean Blue Innovation. And Jake, we are still with OBI to this day! So Marty and his team uh built the original formula. Uh the, which... and there were no flavors at the time, so Lemon Perfect was our original lemon. I mean there was, there was, there was no you know, there were no SKUs, there were no flavors. Uh I didn't even know what a SKU was! Uh and, and um you know I knew, I took the first sample sip of Lemon Perfect August 28th, 2017. And Jake, in that moment you know, that first sip feeling, knew that if I could put the right people around our table, the right team in place, I knew that we would have a chance to build a billion dollar brand that moment. Because taste is the driver of everything, everything in beverage. If you can build something that tastes great and do it in a way like we're doing that also has a remarkable nutritional deck, well you've now jumped into a magic circle of opportunity. And here we are. That's the, that's the story.

Every other call went one way or the other. And I needed for the coin to flip heads, otherwise I don't know if we're here. And that's, that, but that's a theme that has continued to persist as we've moved the ball down the field right. I mean at that time we were at the one yard line with our backs up against the goal line, right? And then we get through that, now we're at the 5 yard line. Then, then you know I said, "Well we've got to figure out what this looks like right, packaging." And I found a woman who was immensely talented. She built some like or helped build iconic direct-to-consumer brands right in the mid-2010s when there was that whole wave right. Um and um you know she said, "I don't have any bandwidth, but you're persistent enough, I'll meet with you" right. So, so I met with her in, in Los Angeles, and really talented. She ended up designing packaging that was, that was A+ on a computer screen right. But it didn't work on the shelf, or at least I didn't think it would work on the shelf when I actually printed a digital right and went to the shelf and put it... it just didn't, it did, it didn't pop. I felt like we couldn't create a fashion show on the shelf, drive that trial, drive that awareness. And so I had to make a big decision. I said "we can launch with this label," or... because we had authorization, so we had an authorization in Bristol Farms in Southern California. My college roommate, his brother was on the executive leadership team at Bristol Farms. So I, I always said "I have to go to California because, because at least I know we're going to be in 12 stores um right, and, and have a chance."

Uh but, but we, we, we pulled back on that authorization. I called 40 investors (we had raised $2.59 million from friends and family in our seed round before I moved to Southern California). And I called those 40 investors. And we had signed with an incubator in food and beverage that was focused on Southern California only, Critical Mass Group. Dan Morad and Robert Alos. And they're still a huge part of our story today because of the two of them and the Bristol Farms piece, I said, "I'm going to Southern California. Once we have the economics, once we have our first round of capital." And Jake, when the bottles came off the line for the first time, I looked at the finished product and I said, "We, we can't launch. You get one shot. You got one shot to make a first impression." And I called 40 investors. I said, "We're going to delay this thing. We're going to go back, we're going to go back into the cave and we're not going to come back out until we feel like we have a chance to really go build something from a front-face packaging perspective."

And that was the, you could make an argument that was the biggest decision that we ever made. Because how Lemon Perfect looks and lives in the world today was the result of making that kind of choice where you know you have investors that are waiting to sell a bottle and you tell them, "Well we're not going to sell a bottle for six months," right? So um, and there have been a lot of decisions and choices like that, but that was the first big one. And, and we said, "We're going to be a, a mile deep and an inch wide to start." We launched in Bristol Farms, then Lazy Acres came, then Erewhon. And so you have this book of natural channel business in Southern California. I had the resources of Critical Mass Group, their field team. Dan Morad taught me I mean everything that I, that I you know know now in the first year, like you know he was a great resource. Um and uh and, and so so yeah.

So that's kind of some of the early pain, and um you know we, we year-over-year in the first year we 10x the business right, and then 4x the business. And we, we made another big pivot to go shelf stable. So we started as a produce item, right, which was, which was a, a major you know learning for me in beverages. It is um, only way to get to the finish line in the big way is to have a shelf stable product. Because you don't have a path to big distribution, you can't build the incrementality, the display space uh or the display activity underneath the roof of the retailer, right? Forget about e-commerce if you're not shelf stable. So, so we, we made a choice um in the face of some industry people telling me "stay cold for another year, stay cold for another year" because listen, there's an expression here (and I actually think it's somewhat ill-founded) that "cold is sold." Yes, you want to fight for cold space, it's everything. But there's a much bigger game behind that, right. It's cold, it's display activity, it's the right programming. It's I mean there's a whole lot right. Um and at the end of the day I felt like we were driving a really nice car down a one-lane road in the middle of the night and speeding up and speeding up and speeding up and spe- and eventually you would just crash. And so we pivoted the business from a, a keep refrigerated item shelf, you know, to a shelf stable item.

And how about this for timing, Jake? Two months later you have COVID-19. So we actually sold our first shelf stable case to Whole Foods in Southern California January 3rd, 2020. We got up on Amazon February of 2020. And then the world... so you talk about like a two-month window. If we don't make that change, and we're still keep refrigerated, no chance that Lemon Perfect survives. Zero. So you know, we make the change. We send a sell sheet down to Publix to the buyer there through a, a terrific broker uh, Bay Food Foods. And uh you know we, we didn't think much of it. Publix is a retailer that usually doesn't take chances on emerging brands. Uh we sent the sell sheet, we send samples, and, and uh Jeff Smith the buyer at Publix, he saw the samples. He took them home to his wife. His wife said, "This is the best thing I've ever, ever, you've ever brought home." And the next day Jeff called us and said, "I'm taking you in all 13-, almost 1300 stores." So that was our first big moment. And, and we really haven't looked back since. Now in Publix we have a you know, a, a greater than 20 unit share of the category. And, and um it's been really fun and um the whole team at Publix has been so supportive. Um you, and, and now um you know um Jeff is no longer there, now Chad is, is, is our buyer and has, has been unbelievable for us. So that, that's been a, a really fun one.

Jake Aaron Villarreal: So you have a product now that's got into the market in, in various, various different store locations across the US and brands. Give, give us an idea of the, the type of stores that are holding your product. So if you want to go out and get it, where would you go?

Yanni Hufnagel: Well Jake, we're fortunate in that you know we, we've got really good coverage across America right. So most conventional grocery has Lemon Perfect. So whether that's the Krogers of the world, the Albertsons, right. The you know, the, the Stop & Shops, the ShopRites, you know so all the Ahold banners up in... so we're, we're, we're you know natural channel grocery, Whole Foods, Sprouts Farmers Market right, conventional grocery. Uh we're starting to make a play into convenience retail, CR. Now in the drug channel with CVS. Uh the club channel we're off to a great start, we're really excited. Costco, Sam's Club, BJ's Wholesale Club.

But it's really early for us right like, I mean if you think about it we're really only in year four of our shelf stable journey. And beverage takes time, time. You know, you, you, people think about you know Celsius which is one of the hottest brands out there right now, Pepsi just took a major position in Celsius, 20 years, that's a 20-year story to get to this point right? If you look at a LaCroix right, that had their major moment in the late you know 2017, '18, '19, 20-year brand. It takes time. Um and uh you know, so, so we're, we're excited about where we are and we understand how much work there is still left to go do.

Jake Aaron Villarreal: When you built the company, you started in Southern California it sounds like, getting the product and distribution up there. Um lemons are you know in parts of California for sure, in different parts of the world. Where do you get your supply from? We know supply chain always is an issue and there's always a challenge of getting the right products, the best products. What's been your strategy that's worked for you?

Yanni Hufnagel: Great team. So we, we have an unbelievable supply chain team. Nas Soy, our Senior Vice President of the Supply Chain, has been with us for four years. Um she's actually coming up on her four-year anniversary here October 1, um so that'll be an emotional day for me. Uh it's actually, Jake it's, it's our first four-year anniversary. So we celebrate work anniversaries, one year, two year, three year, four, on our all hands, on our bi-weekly all hands. And tomorrow is our first four-year anniversary, right? So uh I had my five-year anniversary like March, that was my first official day at Lemon Perfect, March 18th. The first day, the day I got, I paid myself $1 was March 6, 2018. So I had my five year, and now Jessica DeMello who's our General Sales Manager in the New York metropolitan area is our first four-year work anniversary. So um, but anyway to answer your question, uh the, the original thought for me was "we're going to tell a story of, of organic California grown lemons" right? And uh we were able to tell that story for a couple years, and then the supply chain became an issue right? So, so then we, we moved to Arizona. Uh and now Jake, with our volume (you know next year we'll, we'll sell um more than 50 million bottles of Lemon Perfect), uh with that our lemons come from Mexico and Spain and Argentina as well as California and Arizona. So we have a global supply chain now of organic lemons.

Jake Aaron Villarreal: When you look at the company and you look at the product you're selling, you know there's a lot that goes into it. It's not just about the raw materials, it's the distribution, it's the marketing, it's the people. What do the margins look like in a product like this?

Yanni Hufnagel: Better today than they were a couple years ago. Um you know look, I, I will tell you that, that uh for me the, the two most important metrics in evaluating um you know the, the, I guess the value of the business are uh product margin and growth. And we're very, very focused on those two things right. I believe that that puts us in the winner's circle. If we have category leading product margin and our growth is meteoric, I, I think that's the, that's, that's the formula, that's the recipe for, for creating you know uh fireworks and, and, and, and, and ultimately um liquidity you know for our investors and for our team.

Um I won't get into margin the actual margin math itself, but what I will tell you is on day one I didn't care. Didn't matter. All I wanted to do was to produce the best product and get people to start drinking it and talking about it. Like I said, we were a keep refrigerated item. It's all I knew. And I also knew that was super critical in this journey in beverage. So our set at the time was like 4.49, 4.99, 5.99, 6.99, 8.99 right, we were in there with juice. Suja, BluePrint, you know Daily Greens, WTRMLN WTR, Harmless Harvest. Like we were in there with all the keep refrigerated items. But I said that for us to start to drive the trial and get the early traction, price was going to be really important. So we ended up launching Lemon Perfect at $2.49 a bottle. Um and, and so when you walked up to this sea of four and five and six, seven dollar options and you saw us here at 2.49, for something that delivers our nutritional deck, our flavor profile, the enjoyability of drinking the beverage itself, like that, that was, that was some early... right, so I mean if, if you asked me "what, what are the keys to building a, a beverage brand?", I will tell you it's, it's, it's, it's you know it's packaging... well first product, packaging, pricing architecture, people. Four P's: product, packaging, pricing architecture, people. So um you know that, that, that was, was... those are the fundamentals of, of winning in, in beverage.

And um you know and, and, and so now you know, and we've, we've followed suit on that really from, from, from day one. But to go back to your, your, your margin, all I was concerned about at the beginning was, was growth. Was, was using, getting some early data to go be able to raise the next round of capital. We say "survive and advance." Keep the story going right. And we still talk about that, "kids today" right, "survive and advance." Let's keep going. How do you survive another month, another year, another... it's all about growth. Growth is oxygen, right? What's the first number that anyone asks? "What's your revenue?" That's before everything else, "what's your revenue?" Now you better have a path with scale to have big time unit economics, margin math.

And we've gone through... we are now, we will in three weeks we will be at what will be our last contract manufacturer. We're really excited. Um it was a, it's uh Niagara Bottling. So I, I met with them for the first time in 2018. We hadn't even transitioned. And Rob Alos who I mentioned earlier, who had been at Niagara for 10 years, he walked me into their plant in Rialto. And Jake, I said, "I don't know how we're ever gonna get here" right. I mean you're... I mean you're talking about lines that are running at... I mean those plants are running 6, 700 bottles a minute! Now we're going onto a line that's going to be a thousand bottles a minute plus. Um but you, you gotta have, you got to have vision for where you can go. And to actually be able to realize with my own eyes where we could take the business from a manufacturing perspective, the scale that we would need to get there, like that was really, really helpful. So that image of that plant running big, big brands at that speed right, with laser-guided vehicles right, like, like you know, not many people running around, like the highest level of sophistication. But ultimately, and now here we are! But we had to, you know we had four contract manufacturers on the way there right. And we have been through all kinds of hurt and pain in our supply chain. We produce these bottles aseptically, there's just not a lot of capacity. And finally, you know, finally after what, five plus years of scaling this business and unimaginable p- pain across the supply chain, here we are now feeling like, "My God, we have the capacity uh and the manufacturing um uh intelligence um to scale, to scale violently." And, and now with that we have a margin profile right that uh is going to, is giving us the operating leverage when we look at our forward-looking model to, to really um be able to paint a hell of a business story.

Jake Aaron Villarreal: I love that. You've got a lot of investors, 300, and a lot of famous people too. What was, is your process in attracting the right investors? And you're talking about you know, athletes and musicians and influencers [at] some level. What, what, what was your process there?

Yanni Hufnagel: You know, selling a, selling a big story. Um you know, for, for me, um you know we, we, we think we've got a, a, a TAM that um you know total, total addressable market size that's, that's unrivaled. Um you know we think we have a story of scarcity right. I mean in, in, in the flavor enhanced water category you have a monster transaction about once every 10 years. So you had Vitaminwater in 2007, that was $4.2 billion to Coca-Cola. You had Bai in 2017, $1.7 billion to Keurig Dr Pepper. Um you know for me, what will be the next one right? What will be the next one? Well we think it's Lemon Perfect. We know it's Lemon Perfect. There will be a next one right. If it goes by every 10 years it's 2027 right, so we better hustle up and go!

But, but um you know look, I, I, I... we've as we've scaled the business um, we've matured right in the way that we operate. When we tell you we're going to do something... and when I say "we" it's the entire organization... uh the last three years (and this will be the, the you know, this is the third year in a row), when we put a number on the board on the top and the bottom, we make the number. And in this world of emerging food and beverage, or really even the entire startup ecosystem, that's rare. Three years in a row, we have told our, our investors, our board, "here's where we're going to go," and we've done it. And so you build credibility over time. That certainly helped us in the later financings. Um so there's a, there's a fiduciary integrity if you will that I think we've, we've, we've earned uh, or we've displayed I should say. Um and with that we've earned um you know uh the, we've, we've earned a level of interest in the business.

Um you know and, and um you know I think anytime that you have a chance to invest in a business that um can sell for over a billion dollars there's going to be enthusiasm right. And we've raised a lot of capital to get to this point. Fortunately we think that we will never have to put uh you know we'll never have to raise equity again. Um and so that's an exciting you know moment obviously for all of us um, almost a hundred million dollars later. But um, but that's beverage right. I've always said, I've always said Jake from day one that it was going to take us a hundred million dollars to build a billion dollar business. And here we are, we're, we're the story, the story is tracking. Uh we've been, we, we, we've had one wheel on the tracks for many days and many months and maybe many years, uh but it feels like we've got two wheels on the track and, and, and um you know really charging for something great.

Jake Aaron Villarreal: That's great. Um you know, want to ask you a question here. You, you are the, the heartbeat behind the company. I can feel your energy, I hear you, you talk, you're, you're inspiring me, I want to come work for you. Um the, the, the energy it takes uh for anybody to be consistent and to keep leading, um you know you got to do the right things. How important for you is sleep, is health, is eating, is exercising as a leader?

Yanni Hufnagel: Uh as important as anything. Um you know look, I think, I think if you, if you took a vote uh with all of our internal stakeholders, external stakeholders, they'd probably think I'm you know working 18 hours a day. That's not true, it's, I sleep eight hours. I train, I try to train an hour a day, uh workout. Um and, and um I you know, I, I, now I'm in a, a phase where I'm taking a breath and walking without my iPhone and sitting in a coffee shop. And um, but when I'm on I'm on! So that's my secret sauce right, is, is I'm taking care of myself when I'm behind the walls, and when I'm out in the open no one will outwork me, no one will out-energy me. Like that's the you know, so there's a perception right.

But, but, but um you know maintaining uh, or, or getting sleep, training, uh eating clean right, it's all part of what, what we're building at Lemon Perfect right. Like every, we have a $100 a month fitness reimbursement for our entire company. And look, not everyone uses it, but I'm on people about it right. And, and um you know it just, it's... we're trying to change the health of the American consumer, and so I need to be, I need to be part of that equation right? And, and, and need to live that lifestyle. I'm not perfect, um by any stretch right. Um in certain environments where you have to go have a you know, a hamburger and fries, you do it right. There, there, there has to be you know some, some level of, of freedom right? Because you only get to go through this journey one time. So enjoy it.

Um but health and wellness is a huge part of me and, and, and who I am. And it transcends I think to the entire company. And, and so yeah, I've got to be, I've got to be on it. When I'm, when I'm out in the open I, I have to, I have to be flying around the room and yelling, screaming in a positive way and just having fun! And I think that's what we've been able to build you know, our early success on, on the back of, is, is just great energy. And it has to start with me, but it, it has certainly Jake, permeated across the organization.

Jake Aaron Villarreal: Yeah, I, I love that. You know energy is important. They say you know in business 80% of it's psychological as well. You have to have the right mindset, you have to you know go with the ups and the downs and be able to kind of stay focused on the, on the big picture. For you, um have you ever used a coach or someone outside the organization that kind of you can be a sounding board with and collaborate with on, on problems, on areas of growth, of, of, of problems whatever it happens to be?

Yanni Hufnagel: You know what, I'm very fortunate in that I came from an environment where I was around incredible coaches. So those, the, the coaches that I worked for, the coaches that I'm friends with, that's my coaching right. Um I've, I've tried the business coach and I, I didn't transparently Jake, now maybe I was with the wrong one, but I didn't get as much value as I do in my conversations with Tommy Amaker who I worked for at Harvard. Or with uh Jeff Capel who's now the head coach at Pittsburgh who I worked for at Oklahoma. Or Cuonzo Martin who I worked for at California who I talk to every week right. I was just before I jumped on here I was texting back and forth with him. He now has a podcast and invited me to come on and be a guest. And so I think I'm going to go down to Orlando in a couple weeks and go do that right. And, and, and so for me... Eric Musselman who I worked for at Nevada um uh we, we are um very, very close and I'm so proud of what he's done at, at Arkansas um with that program. And, and so I, I have a network and then through my relationships you know uh great connections with coaches across basketball, football, ice hockey right. So I, I, I have this incredible you know ecosystem of coaches.

And I've gotten the business coaching by putting the right people around our table right if you will. So whether it's ex-entrepreneurs, ex-entrepreneurs, successful entrepreneurs that maybe are no longer running businesses (so I guess they are ex-entrepreneurs) around our you know boardroom and table, and um you know the right financial minds around our table. Really it's a story about execution right? Setting a strategy and executing. It's the same thing that I did as a basketball coach. Put a good game, go get great talent, put the right game plan in place, and then go execute. That's it! So coaching college basketball, coaching college football, coaching in the NFL, coaching in the NBA: get great talent that can buy into team right, so that trumps all right. The ability to, to be a great teammate, the focus on winning, but you get the right people and then set the right game plan. So strategy, and then go execute. And that's how you go in and, and, and, and you know for us with that, you know we do those three things right.

Get the right people, recruit and retain. Got to recruit and retain because this journey is you know, unlike a college basketball season, you know we're, we're on this thing for you know four or five years right, so there's a longer duration of time. So you got to retain. Um it used to be like that in college basketball. Now it's such a revolving door where you have you know in the world of NIL and, and, and unlimited transfers right, or, or the world of free transfers, um you know it's like a one-year deal now in college basketball, season to season. You know, for us we have, we have duration right. We have to scale the mountain over time. Um it's recruit and retain, have the right long-term strategy and vision, vision, and then go execute against that plan. And uh you know, it's served us really, really well Jake. Here we are, I mean uh we, we believe that we're going to be the last team standing. We believe that we're going to, we're going to go cut down the nets. Um and so uh um but it starts, it starts with, with, with your people and with your team.

Jake Aaron Villarreal: Yeah, well you're on an amazing journey with lots of growth ahead it looks like and sounds like, and, and trust me I'll be one of the, the, the consumers putting some money on that bottom line for you. Um as you grow to a billion dollars, what is um next for Lemon Perfect? Any new flavors, anything coming out that you can talk about in the future? Or are you just focused on where you're at, you got a great brand, good product, getting it to market? And then lastly, if people want to find you, how do they find you?

Yanni Hufnagel: Yeah, we are weeks away. When I talked earlier about the new contract manufacturer Niagara Bottling, there is a, a big change. Uh we are going to a 15.2 ounce bottle. So we're going from a 12 ounce bottle to a 15.2 ounce vessel um uh for several reasons. And we're also uh taking erythritol out of the formula. So we're going to go to a, a Stevia only blend. We think that we've improved the flavor. Um so big changes coming for Lemon Perfect here in the next three or four weeks. Uh you will, you and everyone will see the new bottle size out in the world uh in the first few weeks of November. So here we are on the precipice of, of what we've called here internally "The Great Transition" right. Um but we get through this um, and uh we get through this clean, and we feel like we can put our foot on the gas. So you'll see us start to build a brand behind the bottle, um and, and drive a marketing story away from the four walls of a retail store or our digital shelf on Amazon or our own .com platform. Um so you'll start to see more of that right, driving at the you know the, the, the top of the funnel, just driving awareness. Um and um you know and, and uh I would say buckle up! I think we feel like, we all feel like we're just getting started. The next chapter begins, that's for sure right. The next chapter begins here, call it January 1, as we really introduce the new bottle into the you know into the world uh formally, you know through our social platforms, website, all marketing.

Um and uh look, you can find me Yanni on Instagram y-a-n-n-i. Uh I respond to all DMs. And then on LinkedIn through direct message as well. So um uh I uh I try to get back to everyone. You never know uh where that seed might ultimately um you know uh or what that seed might grow into. So Yanni on Instagram, Yanni Hufnagel on LinkedIn, two great channels and uh uh any listener of this podcast Jake, I, I would just you know if you say you know "Match Relevant podcast", uh I will jump on an answer and looking forward to building a relationship.

Jake Aaron Villarreal: I love it! Well Yanni, thanks so much for joining us today, a big shout out to you. And a big shout out to our listeners for taking your time today to spend it with us, it means the world to me and it means the world to our company as well. Um my name is Jake Aaron Villarreal, I'm the host of From the Ground Up podcast. Appreciate your time and until the next episode we'll talk soon. Take it easy Yanni, have a good one. See you.

Yanni Hufnagel: Thanks Jake. Thanks so much for having me.

Jake Aaron Villarreal: Before we wrap up, I want to give a big shout out to all the entrepreneurs that have joined to make this podcast possible. And for all the listeners for listening, it means the world to me that you chose to spend your time with us today. I'm your host Jake Aaron Villarreal signing off for now, but can't wait to connect with you all soon on the next episode. Take care.  

This show is sponsored by Match Relevant, a company that helps venture-backed startups find the best people in the market. And they do it in three simple steps. First, they sit down with founders to understand their story. Second, they tell their story into multiple candidate channels. And third, they schedule interviews within 48 hours. Find us at matchrelevant.com to learn more about how we do it.  

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