Peter Rahal started RXBAR from his parentsâ basement with $10k in 2013. Four years later, he sold it to Kellogg for $600M.
Then, he waited out a non-compete and started practically the same company all over again, David.
We get into how buying an ingredient supplier made food venture-backable (theyâve raised ~$85 million), why RXBARâs paleo positioning was a trap, how GLP-1âs have changed diet trends forever, selling cans of fish as a marketing weapon, the lawsuit that got him 120M impressions in a week, and why he studies fashion houses instead of food companies.
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Timestamps to jump in:
0:00 David: Tools to increase muscle, decrease fat
2:24 Making nutrition evidence-based, not ideological
4:27 $300M revenue in year two
5:19 Why he rebuilt the same company again
7:12 Do what you're already good at
9:57 In food, the only edge is brand
12:13 The RXBAR playbook and $600M exit
14:20 RXBAR's original positioning was too fragile
15:25 Designing David from first principles
18:22 Why people don't eat protein bars
19:33 Building a multi-brand company that lasts
25:44 How EPG made David venture-backable
29:44 The Medici name and structure
31:38 Food entrepreneurs are Luddites
33:37 Why Big Food can't innovate
38:21 Beverage is a better business than food
40:34 Deciding which products to launch
43:21 GLP-1's ended diet trends forever
48:09 Looking good is the new status symbol
51:30 Sleep first, exercise second, nutrition third
54:35 Brand is just a unique human being
59:05 Humor travels
1:01:09 Marketing is finding mispriced attention
1:06:35 When to bail on a marketing trend
1:09:05 What makes a good meme
1:10:00 Why David sold cans of fish
1:13:30 How to navigate a lawsuit
1:17:02 120M impressions from a lawsuit
1:18:52 Lessons from Bezos and Brad Jacobs
1:23:30 Why the best brands are fashion and beauty
1:25:00 Women set culture
Referenced:
How to Make a Few Billion Dollars by Brad Jacobs
Find Peter on X / Twitter and LinkedIn
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Transcript
Find transcripts of all prior episodes here.
Turner Novak:
Peter, welcome to the show.
Peter Rahal:
Hi, Turner. Thank you for having me.
Turner Novak:
Thanks for coming on. This will be fun. You, um, real quick for people who donât know, you started a ...
You actually started two companies, but the company youâre running right now, David, can you just real quick give us some 30-second context on it?
Peter Rahal:
Yep. So at David, Our mission is to design tools that help you increase muscle and decrease fat, and we do that through a protein bar that has The highest protein to calorie ratio on the market. So that, what that looks like is a tool thatâs 150 calories, 20 grams of protein, and zero sugar.
So thatâs our hero product is the protein bar, but then we also have protein ice cream, which is really incredible. Itâs, uh, tastes like the full fat, your your kind of favorite naughty ice cream, but with incredible nutrition. So 30 grams of protein, 260 calories, and two grams of sugar, so-
Turner Novak:
Thatâs a pretty bold claim, healthy ice cream.
Peter Rahal:
It actually is. Like from a strictly speaking nutritional profile, it, you know, itâs like a post-workout type of product. Um, so yeah, so we make, um, so thatâs David.
We make protein, different protein products that maximize this concept of, like, protein to calorie ratio. So anywhere between 75% of the calories to 50% of the calories coming from protein.
Turner Novak:
How unique is that? Like, what do food, like protein foods normally have, or just generally food in general?
Peter Rahal:
Yeah, I mean, uh, on protein bars, so our gold bar is 75% of its calories coming from protein, so the rest of the market would be around 45, um, 45% of its calories coming from protein You know, itâs pretty easy to calculate. One gram of protein is four calories Carbohydrates and fats. Fats are nine, carbohydrates are four.
So itâs actually just like a way to objectively measure food in a way versus the subjective like clean, bad, good. Like foodâs quite a barbed wired ideological place, and so really one of our missions at David is like to make it more intellectual and evidence-based rather than sort of you have these heuristics that sort of arenât that sophisticated.
Turner Novak:
Yeah. Itâs interesting like the way that food is always branded. Yeah, like to your point, like clean or itâs like non-GMO or free trade or something.
Itâs like, oh, what does that even mean? Tech like you just say anything you want. Itâs like greenwashing.
Peter Rahal:
Yeah, completely. Like clean can mean anything. So yeah, like our...
One of our... I just... Was...
My first business was RXBAR, which one of the frustrations I had was like this, there was this utter confusion around nutrition, and it was like there was no definition and total misinformation. Itâs like itâs like not a real science. And yeah, it just led to people sort of these massive swings in, um, nutrition culture.
So wanted to build something really robust that was like really evidence-based.
Turner Novak:
And itâs kind of crazy because, I mean, in terms of like how big food is just like a thing, like a market, like a category. Every single person eats probably, I donât know, two to six times a day. We spend...
In the US, itâs like two to three-ish trillion a year, depending on like how you measure certain things globally. Itâs, uh, like a lot of people, itâs like 10% of their daily income or like 50% of their income is just spent on food and eating. And it also, itâs like goes in your body, and it impacts how you grow.
Like itâs just everything. Food like down... Is like upstream of everything.
Everything flows from what you eat. And to your point, itâs like we just kinda like make things up like, âOh yeah, this is healthy. Like donât worry about it.â
Peter Rahal:
Yeah. And yeah, it really affects like... You know, itâs like how is it organized?
Itâs macronutrients, micronutrients, calories, and like those things all matter more than the ancestry so...
Turner Novak:
And whatâs kind of the scale of David like today? Like how do you talk about just like the current scale of the business?
Peter Rahal:
Yeah, like with my first business, we were really secretive about it all, and now I just sort of say everything. This is our second year. Weâll do over $300 million this year Which is incredible.
Itâs been like dog years here. It feels like itâs been five years, but itâs only our second year. So weâre weâre just domestic in the US, and yeah, weâll grow 300% this year.
Turner Novak:
Nice. I think, um, I think I saw youâre thinking itâll be about $300 million in revenue this year, or in year two, I think is what it said.
Peter Rahal:
Yeah. Yeah, north of that.
Turner Novak:
Nice. And I think the, probably, like, the most interesting thing just, like, about you is like you talked about, you built RxBar, you sold it, and then I think you basically had to wait on a non-compete, and then just you immediately just started almost the same company again. Like, so, like, why did you do it?
Peter Rahal:
Like, personally, as, like, an entrepreneur, I... You just, like, I needed to go back in the arena and go on the adventure. I tried investing and it just, like, wasnât I donât have the temperament for it.
Turner Novak:
Hmm. Whatâs so hard about investing for you?
Peter Rahal:
The feedback loop is really slow. You have no control. You donât...
I didnât find myself... I didnât get mastery or, like, learning anything. Itâs kind of...
I think, like, investing is nice âcause you have... Itâs good for lifestyle. You do get to study a lot of different markets and learn.
But Iâm someone who gets obsessed and likes to go really deep on something. So yeah, so investing wasnât for me, is I just wanted to have another adventure. And then second, like I looked at other like a bunch of different industries and categories, but well, like the one thing I really know well is food, and itâs like my whole familyâs background.
So itâs like, you know, itâs like when I die, thatâs like what it will say on my grave, like the bar guy or something like that.
Turner Novak:
Yeah. The protein bar guy.
Peter Rahal:
Yeah. Like thatâs... And Iâm like okay with that.
Um-
Turner Novak:
Yeah ...
Peter Rahal:
So just like self-awareness and then just, and then like the... I understand the market. Like I like people want the like people want a product that can help them build, increase muscle and decrease fat.
And, um, I think the market wasnât offering that.
Turner Novak:
Well, and I think thereâs something to be said too about just, like, doing what youâre really good at. Like, for example, I did not really wanna be an influencer. Like, it just kinda happened, and Iâve been...
I just kinda, like, have accepted, like, I mean, I guess Iâm pretty good at this, so Iâll just keep doing it and lean into it. Like, why would I just remove all that skill set from my, like, repertoire of what Iâm doing? Like, itâs kind of a...
Itâs kinda dumb not to do what youâre good at. And, like, you know, you... Like, letâs say you started, like, a, I donât know, like, a trucking company or something.
I mean, like, Iâm sure youâd do fine or whatever, but, like, you donât have all the same connections. Maybe you do in food. Like, maybe you can leverage all the connections you made for the trucking company or whatever, but, like, just the nuances of all that, Iâm sure youâd have to start from scratch.
Peter Rahal:
Yeah. Yeah, and, like, I started when I was, like, 12 years old really, like, just listening to my dad, and then my first jobs were, you know, internships for doing supply of, um, raw material supply. And then, yeah, so, like, shifting a career is pretty expensive and I think the worldâs so competitive.
You just gotta... It just compounds. All the knowledge compounds, and the knowledge is whatâs really valuable.
I think itâs where, like, a lot of entrepreneurs, like, look at Elon and say, like, âOh, look, he shifted from this to that to this,â and heâs just, like, an N of 1 And I canât learn as fast as him, so
Turner Novak:
Well, and itâs also not like SpaceX started a couple years ago. Like, he been, heâs been doing it for over two decades now. So, and it wasnât like it was successful right away either.
Like, it took him, I donât know, almost 10 years. I forget exactly, like, all the timelines, but, like, it took him, like, 10 years to just get one to work in the first place, so it still took a really long time.
Peter Rahal:
Yeah, totally. But he did go from the internet to internet companies to just straight complete pivots.
Turner Novak:
Yeah, fair. But itâs also... I think itâs also an argument for, like, you should do things that are actually really hard.
Like, you know, you donât just... Like, in food, you see a lot of people, they maybe just, like, work with a contract manufacturer, take a existing whole ingredients, make a brand that kinda looks like whatâs already out there, and you just, like, make Shopify store, and you, like, you pay some influencers or whatever. I probably, like, didnât describe this right, but, like, that, it feels like thatâs what everyone kinda does, and they donât do anything thatâs different or harder.
Like, youâre not really inventing anything new per se. And I mean, I feel like itâs like that in every category. Maybe Iâm wrong, but...
Or not just food, like every business, right? Like, you gotta do something thatâs, like, unique and difficult.
Peter Rahal:
Yeah, for sure. And least I can speak on food is thereâs sort of, like, no more white... Thereâs very little white space in food, and everyone has the same materials.
Your kind of, like, only differentiation is art, which is brand, which is super abstract. So yeah, in food itâs super hard.
Turner Novak:
So what did you do differently the second time around? Because you... Or maybe it would be interesting really quick for people who donât know the RXBAR story, talk about what you did, how that went, and then maybe you can talk about what you decided to do differently second time around.
Peter Rahal:
Yeah, so quickly on RXBAR, Pretty resource constrained. So me and my co-founder Jared started it. Um, we each put $5,000 in and kind of built a business the old-fashioned way.
Like, started in my parentsâ basement, you know, made 100 bars, sold it locally, took those, made 150 bars, etc.. So we were like brick by brick.
Turner Novak:
How did you, how did you, like, convince people to use it and try it in the early days? Like, walk into the store, give it to them till theyâd place an order?
Peter Rahal:
The market we started, it was CrossFit gyms Which was really uncompetitive. So it was like a perfect early adopter market And so thatâs, that we were the strategy was letâs be, letâs dominate that market, be the protein bar for that market, and then figure out across the chasm to the natural food channel and then mass market
Turner Novak:
Itâs kind of, the thing I think about a lot is, like, can you figure out a new distribution channel? So, like, that was a distribution channel that probably didnât have a product like that you could basically slot into.
Peter Rahal:
Yeah, but it was totally uncompetitive, and it was all, like, just product market fit. Like, we didnât do anything marketing-wise, no ads. It was just trial sampling and getting awareness.
So, you know, we got to, like, $10 million there and then crossed into we rebranded, repositioned, and then went into the natural channel and yeah, took off from there, had product market fit, and then sold in four years to Kellogg for $$600 million. And then yeah, had a five-year non-compete. And then, you know, the story of for, from RX to David is a bit of, like, a bit of my own journey through nutrition.
So RXbar was really ideological. It was a paleo protein bar, sort of this ancestral idea and ideology. And then with David, itâs really more about nutrition and, um, and evidence rather than ideology.
So itâs like a fundamental different positioning. And the reason for that is, like, at RXbar, all the early adopters of ours that were doing paleo had all those consumers and customers moved. Like, two years later, theyâre doing keto, then theyâre doing carnivore, and so they just...
I saw all that, um, and it was really a vulnerable position. And Yeah, I wanted a position that, like, just was really based on, like, nutrition, like actual science and evidence, not just like, yeah, the the ideologues of, um, paleo. And so, and then with David, so The product, like if you design a protein bar from first principles, like you, what people actually want is the most protein, the least amount of calories, and then they, it has to taste good.
And so we just designed that and through designing that, we encountered a fat technology called EPG And that completely changed just enhance the product tremendously âcause, you know, you have these choices of like, do you wanna use palm oil? Like, you need fat for, um, taste, texture Itâs a itâs like a, itâs funny, like you donât realize how important fat is in food until you, like remove it.
Turner Novak:
Yeah, and then thereâs these like no fat... Wasnât like no fat and like fat-free, no trans fat. Itâs been all these like diet trends over the years is actually removing it.
Peter Rahal:
Yeah, and they removed it and added sugar.
Turner Novak:
Which is like way worse.
Peter Rahal:
Yeah. But the thing about fat is like thatâs the biggest driver of calories. And so you do, you, like the...
If you look at the, like the highest level from like a public health perspective, not so much in Ann Arbor or in New York, but the biggest issue is overconsumption of calories. Like and they call it energy toxicity. And so, like most negative health outcomes come from that problem.
Turner Novak:
From eating too many, consuming too many calories?
Peter Rahal:
Yes. And so it turns out if you just donât overeat calories, um, most of the negative health outcomes are mitigated. Um, so, and then obviously here comes, you know, GLP the GLPs and why theyâre so popular So anyway, we designed the product with that in mind.
Um, âcause when you think about nutrition bars, like youâre not eating them for pleasure, youâre eating them for very much a nutrition goal, and typically itâs body composition, increasing muscle, losing weight, body fat. Typically, thatâs the only weight people really wanna lose. And so thatâs the, um, that was what we focused on.
And, uh, yeah, we have a killer, I think we have a really killer product that, and weâve got product market fit. So itâs pretty hard to do that in food, to be honest.
Turner Novak:
Yeah. It sounds like, so the biggest thing you did, or one of the big things you did differently was thinking about it almost from, like, a retention perspective. Like, keep making sure your customers would continue to come back.
If Iâm getting this, like, super, um, Iâm not taking away all the romance of it. Itâs, like, basically like will the customers, like, not churn essentially is, like, what you were trying to crack and figure out with this.
Peter Rahal:
Yeah. So whether, why the customer always churn, but itâs all actually the main thing is, like, studying why do people not eat protein bars?
Turner Novak:
Mm. Interesting. I love protein bars.
I, like, eat them too much to the point where it has probably not been healthy for me as a person from eating too many bars.
Peter Rahal:
Yeah. And well, the, so you find, like, some people are like, itâs kind of binary like, âOh, I eat them and I love them,â or, âI just donât really eat them.â And so if you look at the reason why people donât eat them, itâs usually around taste, texture, and then the second would be, um, nutrition. Like, you can kinda have...
You can really beat the nutrition on a protein shake, ready-to-drink, or a protein powder And so what David was able to do is actually, like, incrementally grow the market. And so around 40% of people that eat our product are, like, previously not protein bar, uh, consumers. So...
And thatâs always just a reflection of value. You... Is it in like, people that order on our website.
Turner Novak:
You just take a pop-up question or something?
Peter Rahal:
Yeah, a pop-up question, and anecdotally you see it as well.
Turner Novak:
So then what else did you do differently? Because you could argue you started, like, a new CPG brand, and, like, it hits all the same things you run into with other CPG businesses, like, and food businesses. Like, what did you do specifically to say, like, âOh, this is gonna be, like, a lasting, durable companyâ?
Peter Rahal:
The main thing is our product differentiation. Itâs just so strong And then going into different categories, so diversifying outside into ice cream. Weâll have other categories weâre going into, and then we actually are migrating the business to a different organizational structure.
So the parent company is actually called Medici, and then weâll have multiple brands underneath Medici in sort of a hybrid model. So the first brand is David, which is all about protein to calorie ratio, really like high performance. Like we make a high tech ice cream, high tech protein bar.
And then the second brand weâre launching in September is called Hallpass, which is better for you confection. So think of it as like... So chocolate has a lot of calories from cocoa butter.
Itâs all fat. So we make it low calorie Low sugar, like tastes amazing, low price chocolate. So wafer sticks, peanut butter cups, and so the way to, like, grow...
When you think about, like, a brand, like, a brand is just a human. Itâs a, it has identity, and, like, so David has its categories and its identity where it can go, and you really have to, like, let that asset be. So thereâs a ceiling on David, and itâs, you know, between a billion and two billion in revenue.
And so whatâs really important is, like, not forcing that, forcing certain products into that brand and just letting that asset be and then creating multiple assets with different identity to pursue different consumer needs. So at Medici, weâll be creating multiple brands that do that.
Turner Novak:
What would be an example of, like, messing up the David brand? Like, what do you think you probably shouldnât do under this, like, understanding the limitations and not, like, straying too much or-
Peter Rahal:
Yeah. So David is all about protein, so building tools to help you increase muscle, decrease fat, so maximizing calories from protein. Something that would not be in that identity would be, like, doing gummies or, Anything not protein Like, yeah.
Like you, yeah. So anything, yeah. So the parameters would be just maximizing calories from uh, calories coming from protein.
Turner Novak:
So itâs sort of whatâs like the brand staple and like if a product doesnât fulfill that like promise, then you almost like create a new promise somewhere else that you then build around, and then once that reaches its limitations, you almost like make another brand promise with... To fulfill something else, whatever it is.
Peter Rahal:
Yeah, exactly. âCause ideally you want a portfolio that sort of serves a broader population. And with Hallpass, like thereâs no protein in it.
Itâs really fun for you products. Like, why do you eat candy? Itâs like a, itâs like a pleasure thing.
And I think the analogy is like Hallpass is what Coke Zero did to soda is very much like that. Um, and I mean, if you look at like Coke Zero, great product, itâs really a pleasure. Like you...
Itâs a treat for you It doesnât have much utility other than like kind of a little self-reward. Um, and so yeah, and itâthat discipline is important and you probably Iâm sure you see examples of food companies doing that. Like at some point you just like throw a bunch of shit against the wall, and like the good example is Doritos, protein Doritos.
Like, you know, Doritos is all about bold flavors. Itâs a huge business. I think it did like six billion dollars in the US, and then they did that, and like I donât think it causes harm for them, but like it just wonât...
I donât know if itâll really work So yeah, the brand identity It sort of defines where you should go and how you should go with your products.
Turner Novak:
One thing you specifically mentioned, I donât think we were recording when you talked about this, but youâre like, âFood businesses usually suck. Like, theyâre, like, terrible investments.â But you went out and you actually raised a good chunk of money, I think it was maybe within the past year. So whyâd you go out and raise money, and howâd you convince people that they should invest in a food business when theyâre historically itâs not the greatest?
Peter Rahal:
Yeah. Like, CPGs businesses are not really venture backable. Um, like statistically you could just look at how many...
Theyâre just really hard. You canât really differentiate. Itâs hard to get a billion dollar exit But that all changed for us when we acquired the, um, one of our suppliers that had the IP around the fat-replacing technology, EPG, esterified propoxylated glycerol.
So that, um, just changed our trajectory completely. So vertically integrating that technology and then building a platform across different brands using that made our business venture backable because now we can go build multiple brands. We have something that makes really differentiated products.
We can get product market fit across different things. And so the, you know, the TAM just completely changed for us.
Turner Novak:
But couldnât you have done that without acquiring the supplier? Like, why did you have to acquire them?
Peter Rahal:
One, they werenât able to scale this... They needed capital to scale the manufacturing. And so, yeah, we needed capital to buy them and scale it.
So it took a lot of CapEx to get their, um, the capacity where it needs to be.
Turner Novak:
Hmm. So then how do you think about maybe vertically integrating in other aspects of the business? Like, what do what should you be doing internally as a food company versus outsourcing?
Peter Rahal:
A couple factors to think about is, like, how difficult is it Meaning is, are there other... So like manufacturing, for example Is it, is that a commodity process? Is it something thatâs, thereâs a robust market for it where there are a lot of players?
So for example, bar manufacturing, thereâs a lot of people that... Thereâs a lot of capacity out there. Itâs, um, you could lock up a line.
You donât really need the CapEx. So that one doesnât make sense. It will make sense once you get to, like, mega scale and then you do a hybrid approach, but itâs just not a good use of capital to be honest.
On the ingredient side, it it probably only makes sense if itâs proprietary, âcause if youâre in the... Like right now being in the in the dairy protein business, itâs a really great time. Dairy, like whey proteinâs like fourteen bucks a pound.
Um, historically it was like six or seven. So theyâre like making a lot of money. But the problem with agricultural products like that is you really canât control the demand.
Like they just, theyâre really volatile. And so it wouldnât be a good use of capital for us. But the reason to buy vertically integrate raw materials is to secure supply typically But it it wouldnât be, like, where we make money and what weâre good at is just making brands and making finished product, uh, for consumers and so anything that helps us do that better might, you can justify, but Yeah, itâs not a capital efficient, I think, just to buy stuff, just to integrate certain things
Turner Novak:
Yeah, it almost seems like itâs like about, um, wherever thereâs like limited supply, like with the raw materials it sounds, and the manufacturing capacity. There just like wasnât enough and you just kinda needed to capture what was out there and then also make it, make more of it
Peter Rahal:
Yeah. And they had they had IP. So buying IP is, if itâs real IP, is super valuable.
Turner Novak:
Hmm. And is it, when you talk about like the other tent pole brands youâre gonna create, is it relevant across all of those or just specifically to protein?
Peter Rahal:
Yeah. Yeah. The, yeah, theyâll all utilize, uh, EPG for the near term.
Turner Novak:
So then whatâs the context of the name Medici that you mentioned?
Peter Rahal:
The Medici family, take it back to history class They were responsible or they created the conditions to get Europe out of the Dark Ages. They were really credited for creating modern banking. And the application for us, so why I, the name is they were the patrons of both Michelangelo Who made the masterpiece, the sculpture of David, which is our namesake.
But then also were the patrons of, uh, Galileo, who developed the scientific method. Um, so the cool thing about our business, which I like love, why I love working here is itâs a combination of both the arts and sciences. Like, if you look at our organization, we have chemists, we have team of food scientists, but then we have like creatives, artists all in the same world So Yeah, so our, and the way our parent company works, like Medici organizationally is where the cash is, itâs where the talent acquisition or people are, and itâs where the, um, product development is, uh, and the science is.
And then, so Medici creates the conditions for all that magic to happen, and then the business units underneath, David, Hallpass, and Svelte, the other one... The ones that make it happen and bring it to life.
Turner Novak:
Itâs kinda like bringing food out of the Dark Ages maybe, where, you know, weâre like, you bring it, like, it... Well, we kind of already talked about it, but itâs like, eh, maybe thereâs better times ahead.
Peter Rahal:
Yeah, there should be. Like, I think a lot of the food entrepreneurs, like, are predominantly, like, Luddites. So thatâs, like, our contrarian sort of view is, like, no, like, technologyâs the opportunity to advance society and make products and foods that solve problems for people.
And so, like, weâre kind of the only ones doing that, actually.
Turner Novak:
Why do you think that no oneâs really done it before? âCause, like, it kinda seems, I donât know, weâre 30 minutes into this, like, kinda seems like it all makes sense. Like, why isnât this more common?
Peter Rahal:
Um, I think a lot of talented entrepreneurs just donât go to food because itâs hard, and itâs not obvious how to differentiate. Nutrition science is not a real science, so therefore you have a lot of like, confusion in the market. Like, for example, you canât study...
The economics donât work to study the effect of a potato on the human body, right? Thereâs just, like, not enough money in potatoes to, like, justify the R&D budget to, like, learn about potatoes. And so thereâs actually not a lot of money going into research and science of nutrition.
And I think Peter Thiel has a quote, itâs like, âIf you ever put science behind something, itâs not a real science.â And like, so like nutrition science is not a real science. And like, it can be, but like thereâs just no money in it. And so, you know, what is food?
Itâs like, itâs really, itâs understanding biochemistry. Like, and so it just doesnât exist. I think itâs probably driven by the economics of it.
Um So I think thatâs the main reason. And I mean, hopefully it will change in the future.
Turner Novak:
Yeah. Do you think... So is it like the food companies are not profitable like, they donât have enough free cash flow to just start investing in the science to develop this out?
Like, they donât make enough from it?
Peter Rahal:
The big food companies have a different... They have, like, a different structural problem, is theyâre all public, theyâre all massive, theyâre all really profitable, and the reason why you buy the stock as an investor is for consistent earnings per share and a dividend. So you have this, like, innovatorâs dilemma.
So, like, for them to actually invest in something innovative that it would be a dilution of earnings per share, and then the CEOs would get fired. Like, the stock would plummet, and they would get fired. So theyâre just not structurally set up to do much innovation.
Turner Novak:
They acquire usually, right? They just acquire anything that seems to be working.
Peter Rahal:
Yeah, and theyâre, what theyâre really good is the scale and running multinational global, like, supply chains. Like, thatâs what theyâre really good at, and so theyâre just structurally not set up to invest in R&D in a meaningful way. Uh, and the point is, like, even if they did, so just take, like...
Their hero SKU makes, like, a 70% gross margin. So then are you gonna disrupt your hero SKU? Like, no, youâre probably not gonna...
Like, thatâs, that takes a lot of, like, courage to do that. And the point is, like, the actual people who own the stock donât want that. They want the gross margin.
They want the dividend. They want... They donât want to dilute earnings per share.
So structurally, theyâre just set up for acquisition mostly.
Turner Novak:
I feel like anytime I meet someone whoâs, like, legitimately, like, proud to be a shareholder of one of those big CPG companies, itâs, like, a great-grandma and that, like, lives off the dividends or something.
Peter Rahal:
Yeah, exactly.
Turner Novak:
And then, I mean, thereâs probably, like, these, like, more passive funds that own it. I feel like thereâs... Everyoneâs always trading in and out based on, like, factor analysis and momentum and, like, whatever kind of exposure you want.
But yeah, thereâs just, like, not very many people that are, like, dedicated long-term shareholders of, like, a big publicly traded CPG company. Like, what you usually see is, I feel like every year or so, thereâs, like, a, some activist hedge fund that comes in and like, âWe gotta spin all this stuff out.â And thatâs... I mean, thatâs the extent of, like, the dedicated investors that actually want you to do stuff, and itâs, like, destructive to building a bigger business.
Itâs like splitting it apart and, you know, maybe you increase shareholder value, but itâs... But not, thatâs not what you want, uh, David.
Peter Rahal:
Yeah, no, totally. And that, itâs, it has to be very difficult to manage those big CPG companies. Um, like Pepsiâs going through it right now, I think.
I think they have Elliott trying to break up the Frito-Lay business. So Iâm imagine that, like, youâre just distracted by all these things versus really focusing on technology or innovation thatâs, that could provide value in five years. So that, like that lays the opportunity for us.
Turner Novak:
Well, and thatâs probably like the argument of why founder-led businesses usually outperform is âcause you have somebody who owns a majority stake, who controls the business, and will get fired if a quarter doesnât go well. But then you also have the incentives of like playing the long game of like this is like a 10-year thing, but like weâre gonna win, and like Iâm incentivized to get this done. And if like a two...
Like you see it with, um, trying to think of like companies that have maybe gone through it kinda recently under... Like, I mean like Apple, right? Like Steve Jobs came back.
Itâs like his company. Itâs like objectively like not doing very well. And to the point of like destroying hero products, they like...
Didnât they shrink the SKUs down to like basically four products, and they just like simplified everything, and now itâs one of the most valuable companies in the world? I mean, maybe not a perfect analogy, but I feel like theyâre, like thatâs kinda what you have to do.
Peter Rahal:
Mm-hmm. Yeah, I totally agree. âCause like, yeah, I mean, being a public company CEO, getting hired to a legacy business that is enormous, like what are you gonna say?
Weâre gonna weâre gonna risk it all like for something thatâs not proven? Like it actually doesnât make sense. So I mean itâs...
But it, they do have like Cokeâs a good example like as a brand and a beverage. The, like the beverage companies seem to be doing really well at scale But Iâm sure they have problems, but like Coke has grown... Coke and Pepsi both have grown pretty well over time
Turner Novak:
What do you think is different about the liquid then? Like, does the does... Do they basically just sell sugar to people who then bottle it?
Like, do you have higher margins, or is there, like, more... Is, like, is there, like, something thatâs easier about that? Or, like, are they more, like, defensible in some way, or?
Peter Rahal:
So with difference in food and beverage, so with beverage, the cost of shipping is so high that you have real power in just being able to control distribution And think about beverage, like if you go to, if you go to a, if you go to a restaurant or you actually donât have a choice. Thereâs like Coke products are there. You know what I mean?
Itâs not like whereas in a grocery store you have... Thereâs a more of a, more of a full market. So thatâs called like a push market where like the products are being pushed to you.
And then with beverage, LTV is really good. You donât get fatigued on beverages. So the distributionâs really expensive, and if you can control that, you have a moat.
But then the second thing is you donât get product fatigue. And so I donât know what beverages you like, but you kind of live you live with them your whole life Whereas food items, you sort of have fatigue and you move around, like you, theyâre less... The LTV is not as good as in beverage.
And the reason is liquid, you know, itâs just harder to get fatigued on it, whereas food you, the, you sort of... Itâs easy to get fatigued because of, um, the sensory experience.
Turner Novak:
Itâs kind of interesting because when you explain that like the... Iâm assuming like beverage maybe has lower margins or more fixed costs necessary to like distribute the thing, which is then actually more defensible. Like itâs more capital intensive, but itâs actually more defensible because itâs harder to displace that.
Peter Rahal:
And then like if you look at from an investor lens, beverages have the best outcomes historically, but have been the most capital intensive. Like very, like you gotta get them to scale and theyâre usually really expensive to get to scale. Yeah.
âCause theyâre, itâs, yeah. The gross margins are terrible in the beginning.
Turner Novak:
Interesting. I mean, have you guys weighed then getting into beverage? Like a protein drink Iâm sure would be, like...
I think those already exist.
Peter Rahal:
Yeah, weâre looking at it.
Turner Novak:
So then how do you, how do you decide what to launch? Like how did you go through this process of like within David, but then also building like the other tent poles that youâre doing? Like how do you, how do you do a, like a project of like figuring out what to do?
Peter Rahal:
Yeah. So obviously we started with the, our gold bar. That was just because I knew it the best.
Um, and then, so one factor is just like can we make a product thatâs materially better than whatâs on the market? And I say like subjectively like 30% better And in all factors taste. Like ev, customers want, customers always want three things: better taste, better texture, better nutrition, and better pricing.
So if we can deliver those things, like, we have a good shot at product market fit. And then so thatâs one, like, framework, and then the other one is where are there products that are dependent on a lot of... What, where are there products or items that have, uh, a dependency on fat to taste good?
Turner Novak:
Because you have the tech to replace the fat.
Peter Rahal:
Yeah. Yeah, fat and sugar, basically. So I, like, just have a nose for fat and sugar.
So where thereâs a lot of fat and sugar, those are the areas we can, like, really innovate. And the fat, the products that have a lot of fat and sugar are usually the best. So perfect example is ice cream.
Itâs cream and sugar.
Turner Novak:
Just like pure fat and pure sugar, yeah.
Peter Rahal:
Like, one pint can be 1,400 calories, to give you an idea. Itâs like, itâs a lot. So thatâs like, thatâs why our ice cream productâs probably our best product we have is because itâs...
That item is so dependent on those things, and we can we can do that. And so chocolate as an example, itâs mostly fat and cocoa butter and then mostly sugar, so itâs high calorie, high sugar. We can make it low calorie, low sugar And the other one is frying, is a, is an interesting space.
So we can fry an EPG and, um, we can make a tortilla chip thatâs half the calories.
Turner Novak:
Interesting. So what other so this is frying, like you deep fry to then crisp and store and ship it? This is not like a...
Well, like chicken nuggets, are those deep-fried in some way?
Peter Rahal:
Yeah. Theyâre breaded and fried, yeah. Like a, like the best foods are like, you know, like a donutâs like itâs fried sugar bread basically.
So itâs probably the worst thing you could eat.
Turner Novak:
But the best tasting thing you could eat.
Peter Rahal:
Yeah, like the best... Like fat and sugar is like the best. So we can make...
We can remove a lot of calories from the American diet doing that. Um, and, um, thatâs the opportunity.
Turner Novak:
I mean, thatâs basically what GLP-1s are kinda doing, right? Is itâs just removing calories from the diet. So youâre almost like doing the same thing, where youâre just like, you can still eat your donut, but itâs just half the calories.
So you either eat the same amount or you eat twice as many donuts. Either way, good benefit for you. You get more of it, or you get less calories.
Peter Rahal:
Yeah, and thatâs why like at the highest level public health-wise, like if you just donât do that, most of your negative outcomes are like mitigated.
Turner Novak:
I mean, that seems extremely simple. Just eat less calories and it solves all the problems. Like why has that not-
Peter Rahal:
Because itâs fucking so hard. Because evolutionarily, weâve never lived in like abundance in the same way. Like I, the most disciplined person, itâs very hard to resist the, like the hormonal response of to eat.
So I mean, even like... Yeah. Thatâs why GLP-1s are just such a breakthrough.
Like now itâs arguably a like once it becomes affordable or more affordable, itâs kind of weâll, like in 20, less than that, maybe like 10 years, weâll look back and be like, âRemember when people... Like obesity was a thing?â
Turner Novak:
And so how do you think thatâs change, but then going to change the economy? Like how do you think through second, third order effects, especially with what youâre doing selling food to people? âCause you could argue market shrinking, this is a terrible space to be in theory.
Peter Rahal:
Yeah. Um, on the food So if you look back at the history of, like, nutrition culture, what do people eat? Like, it was really driven by weight loss, at least in America.
And so diet as an intervention for weight loss will no longer be the main intervention. GLP-1s are the main intervention, and theyâre about 1,000 times more effective. So the idea that someoneâs gonna go on January after the holidays onto a keto diet versus taking a GLP-1 is like thatâtheyâre just not gonna do that anymore.
So what happened is, like, the... Yeah, so, like, diet trends are over in that sense of, like, being the main intervention So youâre used to like being in the food business, youâd see like these volatile swings of like, oh, carbs are in, carbs are out, starve yourself, fast, eat six small meals, low fat, high fat, paleo, keto. You saw this like just volatility.
Like those days are over.
Turner Novak:
So why did we do that? Because like, donât you go, okay, Iâve been through five of these diet trends, like Iâm fucking done with these. These donât work.
But people just keep doing them. Like why did it, why did it work?
Peter Rahal:
Yeah. And well, and they like, they kind of work. So like these elimination diets is which they are, is like, donât eat this is good, this is bad.
They do work. Theyâre just not, theyâre not... You have to be really compliant and being compliantâs super hard, and then you just go back.
So I think diet trends are over to this, to the degree in which they were like these massive cultural swings And another funny, I think, effect is like, this is a funny one socially, is I think people are are gonna have more sex. Itâs like, so like sexual activity I think goes up actually, uh, broadly because people like look better, right? Like, if you like itâs just if you wanna have sex with yourself, youâre gonna wanna have sex with someone else.
So yeah, those are the two big effects of GLP-1s is, like... And, like, our portfolio is perfect for GLP-1s because we have David for when youâre on them because you need protein or else youâre gonna get the negative effect of muscle loss. And then when youâre off of GLP-1s, you realize like, âOh, calories do matter.
I donât wanna get fat.â And so youâre gonna be more conscious of nutrition.
Turner Novak:
Yeah. Invested in a company called Fort. Itâs basically a wearable for, like, muscle health.
Like, thereâs no real wearables that, like, help you get stronger. So it works just like a Whoop or Oura, etc.. More targeted towards women.
And just when you do strength training, it, like, automatically tracks your workouts, gives you data around, like, how can you improve, things you need to work on. Theyâre in, like, a similar position where theyâre, like, actually seeing... Youâve seen over the past couple years, like, more interest in just, like, getting stronger now.
I mean, I feel like itâs on, like, the spectrum of, like, everyone wants to be stronger. You wanna be better looking. You wanna look good.
Thatâs like the, like, the peak human is just, like, looking the way you wanna look.
Peter Rahal:
Yeah, like weâre basically social And like, I always feel like on Twitter someoneâs like, âYour, like, bicep veinâs like a the new status symbol.â You know what I mean? Like, for men. And itâs like-
Turner Novak:
I could see that, yeah ...
Peter Rahal:
And itâs like, itâs a perfect example is like with that guy Clavicular, like why did he get so popular? And itâs always like heâs so extreme and vulgar, whatever, but like heâs right. Like, thereâs like a truth to what heâs saying, and itâs like, itâs just funny.
Um, but my observation itâs like itâs all compounded by Zoom, social media. Like, everyoneâs on camera all fucking day. Like remember before COVID, we used to do conference lines where you just would call into a conference.
There wasnât no video. But so, like, now everyoneâs on video constantly, so youâre just like hard not to be self-conscious. And you have like this, like, FaceTime culture of like, you know, like...
Um, so I think that just all exacerbates it. And now you have... So itâs like our societyâSo itâs like our society has like a eating disorder because of all this stuff, and now thereâs a tool that makes it really easy to achieve that, and itâs getting more affordable.
And so like I just donât see a world where that just doesnât continue. But itâs really interesting, like, uh, to like anthropologically to watch it all happen.
Turner Novak:
Well, Iâve seen like the, um, like the thesis whatever. Itâs like you just look at whatâs happening in South Korea, and we kind of... Weâre a couple years behind them.
And I saw a statistic, it was probably about a year ago. It was something like 50% of women in South Korea under the age of 30 had gotten plastic surgery or something like that. Like, kind of an insane statistic, and itâs, it was a lot of just like nose job, eye lift, like maybe smaller cosmetic things.
But itâs basically just like what you get from like a Snapchat filter or whatever or... And it was just like cosmetic things. Like, and I mean, the, uh, the other thing is like leg lengthening surgery.
Like, thatâs kind of a thing that you can kind of do now. Yeah.
Peter Rahal:
Yeah. Everyone wants status and attract a good mate. Like, these are fundamental human things, so like now thereâs technology thatâs getting Like, so people are gonna do it.
Turner Novak:
Yeah. Well, and you think about like a abundance of humanity. Like, I donât know, 1,000 years ago we were just like we spent 90% of our lives just like trying to get food and then eating it, and like that was it.
And then now when you think of like, okay, you make like a million dollars a year, youâre not gonna spend a million dollars on food. Youâll spend like whatever you need, and then itâs like, okay, you go from making one million to two million a year, like what do you spend that on? You just like get a bigger house.
You get another house. Like, you pay for your kids to go to a better school or like being healthier. Like, youâll get the $10,000 a year like on-call doctor or something.
Like you ... Or you like, you know, you get to a point where you like you have a private jet and you just, you can get things faster, you can get places quicker. Like, itâs all about we donât spend on those like basic needs anymore.
We always, we like... As you get more resources, you just spend on things that are Like personal achievement, like status type things, or just like making your life easier, giving yourself more time essentially
Peter Rahal:
Yeah. Itâs like how you travel, where you put your head down at night.
Turner Novak:
Yeah, how comfortable that is.
Peter Rahal:
No, yeah, itâs in... I just see with like anecdotally with my like entrepreneurial friends, like 10 years ago they werenât into health, like no one worked out, and now everyoneâs like optimizing and, yeah, and trying to look good and be healthy and... So itâs a new status symbol for sure.
B-
Turner Novak:
But it is like pretty crazy though that even 10 years ago itâs like, hey, if you sleep three hours a night, youâre not gonna be able to function properly. Like if you get, if you like drink a lot of water, you work out, your brain is better. Like you get a lot of sleep, like you will perform better.
Itâs just kinda nuts that just now itâs a thing. Like why did we not care about this 10 years ago? Itâs just kind of fascinating that it wasnât a thing when it probably should have been.
Peter Rahal:
Oh, itâs so obvious. It was actually like when I first started being, like getting in the workforce, it was like cool not to sleep.
Turner Novak:
Really? Okay. I always feel like shit when I donât sleep, like I canât function.
Peter Rahal:
Oh, yeah. Itâs really, itâs super counterproductive But now, and like, and you think about, like, the importance of health, like, sleepâs number one. If you donât get that, nothing else fucking matters.
Second, Iâd argue, is exercise, like movement. Even mentally, for me, itâs like the most important thing. And then three, then itâs like nutrition, and and nutritionâs just about not fucking up.
Like, donât... You know what I mean? Itâs like managing the...
Itâs, like, asymmetric, meaning, like, if you just dial in everything right nutritionally and spend all this time, like, the benefitâs that. But nutritionâs about not fucking up. Like, the downsideâs enormous if you overeat, if you just, bad macronutrients, not enough micronutrients.
But, like, the real energy should be on sleep and exercise, and the nutrition just donât, you know, itâs a pretty simple framework to follow. You donât have to... Itâs not rocket science.
Turner Novak:
I feel like nutrition can flow into that, though. Like, if you drink a bunch of coffee at nine oâclock at night, like, you wonât sleep. So you do have to kind of-
Peter Rahal:
But thatâs, like... Thatâs thatâs pharmacology. Thatâs not even nutrition.
Youâre taking caffeine. You know what I mean? Like, my point is, like, whether you eat a chicken or tuna or, like, does it...
Like, these, so many people obsess over, like, the total optimization of little things, and itâs like you just gotta get your macronutrients right, your calorie balance right, and then make sure you cover your micronutrients and thereâs, like, five other things. But itâs, if... Itâs not that hard.
Where people get in trouble in nutrition is, like, over-consuming certain things. Like, you know, the dose makes the poison and I see people, like, obsessing over, like, the little things, and then theyâre not dialing in their sleep or exercise. Itâs like, you should weight sleep and exercise way more than anything else.
Turner Novak:
Yeah, thatâs a good point. Uh, so then I guess, like, a slightly different topic, but I feel like you, it... Most people listening to this or watching, they probably heard of David before.
They Like, just because you guys are good at getting attention, like, how do you think about generally marketing? Like, what is your approach at a high level? And then we can maybe get into more, like, tactical stuff.
But how did you think about marketing a product?
Peter Rahal:
I would start Marketing a brand
Turner Novak:
Maybe itâs creating a brand in the first place, yeah
Peter Rahal:
Yeah, so it really is... Like, thatâs the foundation. So you really need to create an brand is...
What is a brand? Itâs just an identity, and the analogy I use, itâs like a human being. And so, right?
Like, what does it look like? What does it wear? Whatâs its religion?
Who are its friends? What are its belief system? What are its personality types?
So like defining just like a person, you want it to have a clear definition of what that is and that identity. And then when you think of... So, and you think of like, you know, Iâm sure you have friends that are just like super boring, right?
Like thereâs... Those arenât good brands, right? Like theyâre just...
They might have some other purpose or whatever, but like great brands are usually like this polarizing thing or they have a strong point of view on the world. And if you just look at our, like human role models as an example, like the ones that are like bold or have a strong point of view or polarizing are typically the strongest brands. Like Trumpâs the perfect example of that as like a personality.
Like super polarizing but super strong brand. Everyoneâs heard of him, like the most... Yeah, so brand, I just, as a, as an analogy is like just think of as a human, right?
And so you have to define that human and then thatâs the foundation for your marketing. So for David for example, like Michelangeloâs masterpiece, the sculpture of David, are symbols, the chisel. The chisel means, is a symbol of intelligence, discipline and beauty when you apply the chisel, but the chiselâs like this really rugged tool.
Itâs like, itâs just a nail, but you can create a masterpiece with it and so we have like all these like values and identity in it and so that, from that itâs easy to market. So like our or our framework for what we do is everything should be around discipline, intelligence and then beauty. So if you look at our image, our identity and some of our marketing, itâs usually around those three values as a brand.
And so thatâs when like in the brand world, like thereâs nothing more toxic than saying like, âOh, thatâs not on brand,â or like, âNot on brand.â And thatâs usually... Itâs like, so you, it needs to be very clear what is on brand and so for us we have these like sort of these values that, um, make it it just makes it easy. Like, so then the the whole team can be like, âOh no, thatâs not David.
Thatâs not, like thatâs not what we do And then, you know, thereâs performance marketing and brand marketing. And then thereâs just a framework I use is like, itâs really like poetry and riddles. Like great branding and brand marketing, itâs like And so it just canât be obvious.
Like, and for example, like, so for example, the most obvious, like we always get candidates doing case studies and like Thereâs the same ideas come up, which is like a golden ticket, like Willy Wonka or something. David and Goliath, like do a meetup with all these Davids, like people named David. Like
Turner Novak:
Yeah, those all make sense. Like, I get all those. Yeah.
Peter Rahal:
No, yeah. Theyâre, yeah, and theyâre not like funny. Like, theyâre not like, uh...
And so itâs like, how do you find something that is true that is, like not, is not obvious? Itâs really actually like contrarian thinking applied to this riddle or branding or like... So thatâs like brand marketing, but then thereâs like tactical, like performance marketing or, which is in our business, itâs just getting trial and getting product in peopleâs mouths.
And so thereâs all these different levels to it. Um, but the fun stuffâs brand marketing.
Turner Novak:
So you think that humor is like a big piece of it or like-
Peter Rahal:
Oh, 100%.
Turner Novak:
Do not enough people do that? I mean, I agree with you 100%. Iâm probably like one of the...
Iâm very serious what, about what I do, but I donât take myself that seriously, if that makes sense. Like, I think... I host comedy shows, like-
Peter Rahal:
Oh, yeah. It it has to be... So hereâs like, all right, how does, on the internet, how do things travel?
Turner Novak:
In the group chat.
Peter Rahal:
Yeah, so itâs either, itâs the... So thereâs two ways that, like education or like informative but, or entertaining, which is funny. So like making educational stuff travel is pretty fucking hard So humor is what travels.
Like, uh, so to me, yeah, itâs all about having a good sense of humor is, like, mission critical. For a growing brand, I think, like, you know, if youâre like Coke Zero, Coca-Cola, itâs like a different game. Itâs like, itâs basically preserve, like donât fuck up, and itâs, everythingâs working really well, and we have 100-plus years.
But when youâre a growing brand sort of trying to take attention, a share of attention, I think itâs like, how do you get things to travel? Itâs humor, cleverness.
Turner Novak:
I feel like humorâs kinda risky, too. So I mean, you have to take risks if you wanna grow. So, and humor is âcause like I could say something that I think is funny, but it actually really offends a lot of people and maybe gets me in a lot of trouble, and that can be good, but also, like, that could be really bad, like, to exponentially detrimental to the brand potentially if you do it wrong.
So really, yeah, if youâre Coke Zero, itâs like, donât do anything funny. Just throw the ... Yeah, just throw the Coke Zero brand on a soccer jersey, and like, thatâs your marketing.
Peter Rahal:
Just get impressions, totally. But if youâre like, you know, weâre like, weâre weâre, like, trying to enter the market, so itâs a different game. But yeah, like once we, like, have market share or weâre at, like, our equilibrium, then we probably, like, risk off a bit, right?
Like, thatâs a natural thing.
Turner Novak:
You could probably just, like, sponsor some athletes or whatever and be like, âThis, like, this guyâs just the epitome of, like, brand and protein and, like, weâre weâre associated with him and, like, weâre safe,â or whatever. Itâs like what Nike does, Adidas. They just, like, you know, they sponsor, like, Steph Curry, give him $100 million bucks and, like, thatâs the branding or whatever.
Just do some commercials.
Peter Rahal:
Yeah. Well, I guess back to my approach to marketing, it, I, um ... We always look for mispricing.
Like, just, and you brought up athletes, which made me think of it. Athletes are totally not mispriced.
Turner Novak:
Like, theyâre optimally... Do you think theyâre overpriced probably?
Peter Rahal:
Massively overpriced.
Turner Novak:
Hmm. Because they... I mean, I I feel like especially in fitness, like, itâs probably extremely ...
Like, âcause youâre just competitive, right? Itâs like a supply demand thing.
Peter Rahal:
Well, and I, hereâs what I, like, when I was growing up in the â90s or early 2000s, like, athletes were, like, the the main role models. Weâre in the Midwest, right? So, like, today thereâs so many more famous people.
So, like, the proliferation of famous people... Like, Jack Welch was, like, the only CEO that was, like, cool from GE. Like, now thereâs, like, all these really cool CEOs that are, like, public figures.
Turner Novak:
I could probably name more cool CEOs than, like, anything else, like, than athletes.
Peter Rahal:
Yeah, so the proliferation of who is famous, like social media exacerbated this So I think the markets are so different, and then athletes still get paid a lot, so their cost, theyâre just expectations high. And then the second thing is for the consumer, like you and I, like weâre fucking desk warriors. Like, you know what I mean?
Like, an athlete is just so... Theyâre like genetically gifted. Theyâre not relatable.
I canât, I donât And thereâs not, thereâs no one like Jordan. Like, the days of, like, a real, like, icon/religious figure like like, theyâre not the same. Itâs like either all of them are so good that thereâs no outlier in the same way, and then the second fact is, like, theyâre just so gifted in what they have that itâs not really relatable to me.
So, like, for all those reasons, I think theyâre just mispriced. And then, you know, you have someone like Andrew Huberman whoâs a real expert in his world that is now a celebrity who is trusted. Itâs just heâs just competing actually with other athletes from an endorsement perspective.
Turner Novak:
Yeah. So then how do you think about, like, how do you spot mispricings or opportunities?
Peter Rahal:
Okay, so thereâs like, this is like a this is a venture one. So you know the new movie, Obsession?
Turner Novak:
New... Thatâs, like, yeah, the one thatâs in theaters, I think still. Yeah.
Peter Rahal:
So someone on our team saw that, and the actress, Inde, was just not, like, just emerging. So this was, like, a very much a venture thing. So he reached out to their agent and did a commercial with her right when she was about to be super popular, and so thatâs, like, an example of, like, we took a risk on her, but itâs very clear sheâs super talented, and that movie is amazing.
Itâs an, like, a national headline. So thatâs an example. I was just saying, you underwrite it, like, itâs just like investing actually.
Itâs very much like underwriting an investment. Um, itâs how we approach it.
Turner Novak:
Yeah, thatâs... âCause Iâve had... I mean, I do sponsorships in the podcast and a lot of people feel like, you know, I feel like your, like, uh, your podcast is kinda undervalued or whatever, which, I mean as the person that owns a podcast, Iâm like, ah, that kinda sucks.
I guess, like, I should be, I should be appropriately valued, but I do think it... I mean, personally, I think itâs true. Iâm like, ah, I think these turn out pretty good.
A lot of people tell me, actually the most common feedback on this is it was actually pretty good. Like, I wasnât expecting it. I was expecting it to be good, but they actually was pretty good.
Peter Rahal:
Thatâs the definition of, like, happiness is expectation minus reality. So better than that than the other way.
Turner Novak:
Yeah. I feel like maybe, like, Caitlin Clark maybe wouldâve been a recent example, not right now, but probably a couple years ago.
Peter Rahal:
We looked at her. Sheâs like, sheâs properly priced. But yeah, for sure.
Like, sheâs great. You just gotta get her at the right time. âCause what happens is then you get, like, you get the Coca-Cola money, you get the, you get the big brand money coming in, and it just drives the price up.
Turner Novak:
So you almost have to find things that are, like, too risky for them still?
Peter Rahal:
Yeah. Like, hereâs a perfect example. We wouldnât do this, but someoneâs gonna do this, and I, we couldnât do it, and I donât suggest us doing it, so clearly.
But porn stars, former porn stars No oneâs gonna... Theyâre, like, mispriced
Turner Novak:
The only reason I know about this company is because they they sponsored... They did a commercial with, uh, I, Bonnie Blue or someone else. Thereâs these, like, two these, like, UK OnlyFans models who just, like, they broke records for, like, most sessions in a day or whatever.
And they did a commercial with her. I think it was called Air. Itâs kinda like a Dropbox, like, file storage thing.
I donât have... I have no idea what the product even does, but it was, like, a big deal that they worked with her. And yeah, it was probably pretty undervalued.
Peter Rahal:
For sure. So youâre right about, like, thereâs this risk. Thereâs...
Itâs just like investing.
Turner Novak:
Yeah. So you almost have to figure out, like, what are some contentious, risky, attention-getting things that are happening or going to happen that I could become attached to or do something with?
Peter Rahal:
Or just, like, youâre just like, a barnacle. Like, you ride it, and then get off.
Turner Novak:
Hmm. How do you know when to get out of, like, a marketing trend? Like, I feel like, for example, um, you know the people who climb the Empire State Building with the flag, and everyone was, like, editing the flag to, like, say their brandâs message.
I started to see people being like, âThis is the most uncreative, not, like, not exciting branding Iâve ever seen anyone do.â Like, so, uh, but so how do you think about if a marketing trend is worth, like, not doing or getting, unattaching yourself from?
Peter Rahal:
For, uh, the comp is, like, April Fools. You know, like, everyone does, like, some stupid fucking April Fools thing. Like, donât do that You just gotta be original.
If itâs not cool, like donât do it. Like-
Turner Novak:
Yeah. Itâs like coolness is also like a big factor of this.
Peter Rahal:
And like what is cool? Like how do you define cool from like high school? Who is cool?
Like cool, I view it as like, right, like thinking out loud is like, itâs like someone whoâs funny, unique, or original. Like why theyâre, why is someone likable like that, right? Like what makes someone likable?
And I think thereâs like a uniqueness or originality to them, and then theyâre like funny in general. Like I think, uh, I donât know about you, like I... Growing up, all the cool kids were just like funny actually or entertaining in a, an authentic way.
So thatâs the parallel I would draw to it. And so like the flag examples, like that was easy, kinda like pirating it, like taking... Itâs just low effort.
Turner Novak:
Yeah. I feel like, uh, something thatâs happening more in like... This is like kind of driving me crazy.
So like I first started making memes on Twitter like seven, eight years ago, and it was like very novel and unique. Like nobody really like made jokes on tech Twitter, and now thatâs like all that it is. So like Iâve been trying to figure out how I have to modify my approach because I still enjoy doing it.
Itâs just like not quite as effective, so... And I almost have like a barbell strategy now where I still do like memes and jokes, and the podcast is, itâs mostly serious. Like itâs like laid back, but itâs like a very serious, you know, youâre learning.
Itâs like edutainment, I guess, is how I think about this. But yeah, itâs so hard to just think about from marketing. Like thereâs so much competition, I feel like you gotta try new things.
Peter Rahal:
Yeah. You gotta be bold, and you gotta take... Like how do you...
What makes a good meme? Like have you analyzed that? Like, âcause memes are like such powerful forms of communication.
Turner Novak:
Yeah. What I found is itâs something that everyone understands but no oneâs talking about. Like thatâs how I usually think about what the best ones usually are.
Or... And itâs something new too. Like I think youâre like the first one to like...
Itâs, and I think, feel like itâs a lot of like mashups. Like pretty much everything at this point, like no one can ever do anything thatâs like new. Everythingâs already been done before, so itâs like some kind of youâre combining different ideas and making something that is relevant today.
Or, and then itâs, thatâs kind of timely. Like you usually have to do things that are happening now, otherwise no one gives a shit. One thing, so when you guys did, you did this like viral launch for the can of fish I think was like the most recent thing.
How did you, how did you like approach going into that moment? Like I think it was kind of this like pretty serious, like she was at the gym, and then she just like randomly just like started eating fish off of a plate that was in her locker. I donât know if you did other videos really too, but like thatâs kind of funny, but it was like pretty serious, but it was also like, I was kinda like, âWhat the heck?â Like thatâs kinda...
Peter Rahal:
Iâll give you the whole story, see if we got some time. So we were making a comparison chart of our product versus like the market And we just like win on everything, like protein to calorie ratio, sugar, protein. And then actually Peter Attia, we were like going over it with him and heâs like, âYou canât trust a chart.â You donât...
Like, when you see a deck, right? You never trust a deck where itâs like, âYouâre the best. Youâre the best.â So I was like, I donât I donât want a chart where Iâm like winning green in everything And so weâre like, âWell, whatâs better than our product?â And the only thing that was better was boiled cod.
So on our launch, on our website, we put boiled cod had the best protein to calorie ratio. Itâs about 85% of its calories coming from protein. And then we put our bar, then some other, like, comparisons.
And we just left there as like a quirky, like dorky thing, and itâs just funny that cod is just like, it sounds like God. Itâs like this... And itâs actually, like bodybuilders love cod because it has this protein to calorie ratio, so like this this niche population like loves this thing.
And so it, but anyway, like people would like pick it up on Twitter and be like, âOh,â like so it was like a riddle that people, or like call it Easter egg, that someone saw. And then like in our launch we were doing well, Iâm like, âI... Like we gotta do something funny.
Like we gotta... I donât wanna just sell another flavor,â like, and so they were like, âWell, how about we sell boiled cod?â And they were like, âLetâs do it.â Like it and it wasnât just a stunt to like, âOh, letâs just like pretend it.â Like, no, letâs actually like go sell frozen cod.
Turner Novak:
So I can go to the website and buy it?
Peter Rahal:
Yeah. And so we did that the first year, and then it was, you know, by measures it worked. Financially, like we didnât sell much cod.
Uh, turns out itâs really inconvenient and expensive, which is why you want a protein bar
Turner Novak:
Actually.
Peter Rahal:
Like, it just like enforced our product. So thereâs a lot of layers to it. So like it so like in our values of like that was like an intelligent marketing thing.
And then like for me, I like... And then we... The next year Iâm like, âAll right.
Whatâs, like whatâs the iteration of this? Like how do we improve on it?â And so it turned into canned cod And so thatâs our next, that was our next innovation. And it was, it interesting, like comparing the two.
The canned cod wasnât as successful like from an impression perspective as frozen cod. Cod one, cod two. And the reason, I think the noveltyâs like not there.
Like you mentioned, like it needs... Thereâs newness that needs to happen, and it just wasnât as new. So, but it was a good...
It was a fun thing, and we still have, we still sell cod. Itâs part of our portfolio. Yeah.
Turner Novak:
Yeah, we havenât tried the cod, the David cod yet. But my wife actually buys canned sardines. Like she just buys like canned fish and eats, âcause itâs just like an efficient way to do it.
Itâs got good nutrients in it, so... One thing that actually, that would be pretty interesting to talk about, you... I think you maybe hit on this a little bit earlier, but you had a lawsuit a couple months ago that Iâm not actually sure the full story, but I think people...
Itâd be interesting people to kinda like heard or to hear more about just how do you approach that? Like if, you know, if this happens to you as a founder, like how do you navigate that?
Peter Rahal:
Yeah, itâs really important learnings. So to depend on the context of the suit, so like what makes EPG great is that it tastes like itâs full of fat, of calories, but the body doesnât, um, canât metabolize it. And so one way of measuring calories is through a bomb calorimeter, which is essentially putting it in a chamber and burning it and seeing how much energyâs in there.
So for example, allulose fiber, those non-nutritive carbohydrates would show up four calories, not .4 or point or two. So thatâs not how we actually measure calories for the human body. Itâs not through burning them.
However, the bomb calorimeter is one way to do that. So if you burn our bar, some of these ingredients will show up full calories. So that, so they had like a lot of litigation leverage, right?
So like they could sue us, we couldnât counter sue So anyway, total par for the course in food, like, and in consumer brands, this happens all the time. Happened to me at RX. Um, so when it happened It just, it didnât go it wasnât like it didnât go viral, but so on TikTok, a really funny creator made a cultural video about like Caitlyn bars, which is from, um, this movie Mean Girls, which I had never seen.
But it was, like, culturally really relevant âcause it, in the Mean Girls, this one, the mean girl gives bars that make you fat. Uh-
Turner Novak:
What? Okay.
Peter Rahal:
Yeah, so culturally, like, this creator made, like, connects the dots that, like, oh my God. And it just went viral on TikTok. And then and TikTokâs this animal that, like, things just really accelerate there.
And, like, the media cycleâs like a week, right? Like, what is trending and cool, like, happens fast, and it moves on to the next thing. But then, like, Good Morning America, all the conventional or traditional media picked up the story as well.
And, like, the headlineâs terrible. Like, you know what I mean? Like, you know how media is.
Like, they just, theyâre just going for clicks, so itâs like there no, there was no alleged. It was just like, âDavidâs lying about their calories.â So the way you have to handle it, you have to move super fast and you have to go direct and communicate. So our approach was like the next day we like immediately went into action.
And this was typically a TikTok problem. Um, and then so like, right, how does information spread? So thereâs like education and then thereâs humor.
So we did one video with our, one of our PhD chemists, Mitch Kohler, whoâs really great. So he just set like an education video. Of course, that doesnât go viral, right?
Like no oneâs going to sit for that, but thatâs there as a foundation for people to land on. And then the second one was like a rumors video thatâs really good. If you go to our TikTok, you can see it.
This is basically like all the rumors that arenât true about the company. And that went viral. It got like $16 million impressions.
So you just got to communicate. And I think you have to use the truth. Um, to, and then you got to use humor back to that.
Like, how do things, how do things travel? Itâs like, it needs to be a, it needs to be travel. Like it needs to be able to travel.
It needs to be a story too. So And the good, like, thatâs crazy is, like, we got $120 million impressions that week
Turner Novak:
What do you normally get on a normal week?
Peter Rahal:
Well now, like 50.
Turner Novak:
Did that give you a step up in baseline going forward too?
Peter Rahal:
Probably, yeah. So like long run, net positive, âcause we educated everyone on calories and how theyâre calculated and We got a lot of impressions.
Turner Novak:
Yeah. And I feel like itâs another point of, like, with, um, how humor... Humorâs like a top of funnel, and then your education is more of, like, a bottom funnel, right?
Where someone might see the humor and, like, most people are just like, âAh, it was kind of funny,â whatever. But then some people are like, âOh, wait, but that one rumor, thatâs kind of interesting.â And then you, like, get the 10-minute explainer video, and then you, like, really get it. And then...
But most people wonât see that. Itâs kind of in, um, in like B2B marketing, right? Youâre, like, making memes about your product, and, like, that gets shared in Slack and then, like, when the, when theyâre signing, like, a seven-figure contract, like, you use the product.
Thereâs, like, white papers and, like, everyoneâs in the technical details. But, like, people donât wanna see that right away. Like, nobody gives a shit about that.
Peter Rahal:
No oneâs got time. So itâs those who communicate fast and be funny or, like, you know, set the record straight, but you gotta go fast, so.
Turner Novak:
And one last question. Do you have, like, a favorite, um, CEO, business, or founder, just maybe multiple, that youâve just kinda gotten inspiration from throughout history that youâve, like, learned from, borrowed from at Medici/David?
Peter Rahal:
Yeah, I mean, a lot. I mean, Iâve, I study a lot of them So like in my free time, I just kind of I listen to Founderâs Podcast, which Iâm sure you know, and David Senra. And then, uh I listened to the, um, long, I think itâs a Sequoia one, I forgot what itâs called.
Itâs like the long strange Long trip? Yeah, long trip or something. The name I canât...
Itâs always in cursive, so I canât see it. You have dyslexia, right? Yeah.
So I donât look at the word. But itâs a really... So, like, my point is, like, those thereâs a bunch of different CEOs in that, and I find itâs actually, like, I always love hearing all the different perspectives.
From a management and, like, culture perspective, Iâve studied a lot of, like, Jeff Bezos, and I thought heâwas really extraordinary. Brad Jacobs, I think heâs done, like, managing ... Itâs, like, something Iâm thinking about is, like, how do you manage multiple business units in a way?
â
Turner Novak:
Cause youâre kinda doing that.
Peter Rahal:
Yeah, like, weâre gonna have four management teams. So, like, how... I canât be in all those management teams.
So, like, the relationship with time changes Um, Elon obviously. Um, I just, heâs just, heâs not, I canât, you know, heâs just so extraordinary. Itâs hard to like be, canât really relate to...
I I find it hard to learn what he does âcause itâs like I canât do that Um, âcause like the hardest thing is like how do you be a good CEO of a high-growth company and a good, like, father and husband and friend? Like, thatâs like the hard part I find myself in is like-
Turner Novak:
Yeah, you kinda, you have to pick in ways of like how how far you lean, and heâs leaned fully into one of the directions, so...
Peter Rahal:
Yeah, thatâs like the constant unsolved problem. I like Alex Karp just âcause heâs so honest and at scale doing that. I admire, like...
And heâs dyslexic too, so Iâm always like, thereâs a chance for me.
Turner Novak:
Yeah.
Peter Rahal:
So, but I would say like like from proper like management leadership is probably Jeff Bezos and Brad Jacobs.
Turner Novak:
I feel like maybe what did you learn the most from Bezos and Brad Jacobs? Maybe Bezos is... People have heard him before, but Brad Jacobs, I mean, I know who he is.
I think heâs like, he wrote the book about founding like eight different billion-dollar companies or something like that. I donât know how familiar people are with him. So what have you kinda learned from those two?
Peter Rahal:
I found... So Bezosâ, like, leadership principles are so good. Meeting culture, we donât do that totally.
Business reviews, disrupting your like just strategy stuff. Like, for example, like our strategy on the food side is like we know our customers want three things. They want great taste and texture, they want more affordable stuff, they always want more affordable things, and they want better nutrition.
So, like, thatâs very much what Bezos... Iâve sort of more or less imitated that with his businesses. Like, customers want variety, they want faster shipping, and they want better prices.
Yeah, and so, like, when in doubt, we should always be going in that direction. Like, over time, we should just be always making better tasting product, better nutrition, and lower cost items. And so thatâs an example of, like, just...
Thatâs strategy, right? Like, you just... Itâs very simple.
Itâs the fundamental thing And then Jacobs was such just an operating model. I listened to him speak on a podcast, um, and I was like, oh, like, you know, itâs... And the pattern is like, itâs all about people, right?
Itâs all about leadership and people and, you know, what is a company? Itâs just an organization of humans in a mission all going the same direction. Um, so, you know, like making sure you have the right vision, operating values, operating systems And right measurements.
And then, yeah, itâs like people and product
Turner Novak:
Do you feel like, do you learn more from non-food businesses or is it like-
Peter Rahal:
Yeah, completely. No, all non-food. Itâs, basically I learned from...
On the brand side, you learn from, I learned from the best brands, which are like arguably I think itâs like beauty and fashion are the best brands. And then on, I think tech companies, I can... You learn a lot on like the management and, um, innovation side.
Turner Novak:
Why do you think brand and beauty are or sorry, fashion and beauty are so good at brand? Like, is that the only way to differentiate, so theyâre kinda forced to?
Peter Rahal:
Yeah, itâs art. â
Turner Novak:
Cause you canât just like make up a new material of dress. Maybe you could, right? But like for the most part, itâs like how do you, how do you position yourself with an artistic point of view?
Peter Rahal:
Yeah. So like LVMH, right? Like their portfolio and if you wanna build a really great brand, I think you just study some of their strategies and ultimately like, I think like the Chanel purse for example, is like...
And itâs an iconic status symbol globally, like globally. And so that, like, that is a really powerful achievement.
Turner Novak:
Like I have never owned a purse. I cannot tell you anything about any of them or how they work, but I know Chanel, so itâs like, to me, itâs like if somebody mentioned it, like, oh yeah, I know that. I think of that as high status or luxury, I guess.
Even if itâs not.
Peter Rahal:
Yeah. Men are different with that, but-
Turner Novak:
Do you feel like... Do you market more towards men or is it pretty like men, women, itâs like about 50/50 roughly?
Peter Rahal:
We market more to women. Women set culture, I think, in, at least in consumer food and consumables Women share more And men follow women
Turner Novak:
I think women drive like 70% of consumer spend essentially is like the number Iâve seen. The kind of the heuristic a lot of people say itâs you figure out where like young teen to like late 20s women, like what are, what is that general gap of like 12 to 30-year-olds? Like, what do they do in there?
Everyone kinda follows them eventually. Theyâre usually the earliest adopters of things.
Peter Rahal:
Yeah, like cool girls set culture, but then the gay men influence the cool girls.
Turner Novak:
Oh, really? So really youâre like, you gotta influence, you gotta follow the gay men first.
Peter Rahal:
I think theyâre the seed.
Turner Novak:
Interesting. Okay. Why is that the case?
Do you know?
Peter Rahal:
Itâs more of a hypothesis or like loose observation. Well, like gay men are, I think they usually have really good taste âcause thereâs like the stereotype. Theyâre usually always in cities Theyâre in fields around fashion design.
They do shape culture. They usually work really hard. Um, and so Popular culture is shaped in big cities by a lot of those people.
So like, they like massively outkick their like population, right? And influence.
Turner Novak:
Interesting, huh? I hadnât really thought about that lens of it, but it ... Well, I guess, yeah, it does make sense to me.
So I guess itâs really like study what the gay men and the young women are doing, and then thatâs how you figure out where cultureâs going.
Peter Rahal:
Yeah, I would say itâs a itâs like some like barometer of that, yeah.
Turner Novak:
Uh, well itâs been a lot of fun. Thanks for coming on the show. This was a awesome conversation.
Peter Rahal:
Thanks, Turner. Hope you had fun. I did
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