The Playbook for Starting A Food Company w/ Mike Tarullo of Banza

On this week’s episode I sit down with Mike Tarullo, COO of Banza. Banza makes pasta, pizza, and macaroni and cheese from chickpeas. You’ve probably seen their products at your local grocery store with their signature orange packaging. They’ve raised about $30 million and have products in 18,000 stores nationally.

Before Banza, Mike helped run Venture for America, the non-profit company Andrew Yang started.

As you will hear during the chat, Mike is clearly an expert on food start-ups and we dive deep into some of the intricacies of what it takes to build them. We get into the nitty-gritty of how the food industry operates, useful strategies that young companies might want to keep in mind, why raising mega rounds might not always be the best strategy, and the importance of conducting research (and actually following what the data tells you!). Enjoy.
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Show Links

• Follow us on Twitter: @tarullo / @eatbanza / @mpd
• Guest Links: Banza, Venture for America, Oath Pizza‍
• Food Documentaries: What the Health, Fed Up

Transcript

MPD: Cool. Let's jump in. So just to baseline for everybody, I always like to start with what you're doing currently. You mind telling us a little bit about that.

Mike Tarullo: Sure. Banza is a food company. Our mission is to inspire people, eat more chickpeas and other beans. And that's because of their impact on human health and the.

Chickpeas are one of the most efficient sources of protein by greenhouse gas, emissions and water usage. They're also super good for you. It's not just the old rhyme, but they're high in protein and fiber lower in carbs. Low-glycemic wonderful food. And so what we do is we turn chippies into foods that people already love.

Pizza, pasta, Mac, and cheese, right? We've been at it for about six years. And in that time we've been the fastest growing pasta company in the country. And you know, in our view really healthy everyday stables to tensegrity, and you know, again we think we're just getting started.

There's a long way to go, not just with us, but with all kinds of food companies that are trying to make healthy products what we go to and select in the grocery store every day.

MPD: How did you guys decide to do chickpeas and pasta? How did that combination become the natural. Starting point for you guys.

Yeah. So

Mike Tarullo: you would highlight it. I've been at venture for America before. One of the fellows in the program and his first in our very first class was in Detroit, working at a startup that I had helped him get a job at. And in, in on nights and weekends messing around with nutrition and making food and things like that.

he had long held that tech was a way to reach a lot of people, but, I think the more he thought about it, and as we find a hundred over time, food is something that everybody can see every single day. And it's a wonderful way to have a large impact on a lot of people. And so he nutrition jockey figured if he could make a better pasta at home in his hand, with his hand, current out of chickpeas, then the stuff that he could find in the store that was made out of, all kinds of other, flowers.

then there might be something there. And so it was really just a happy accident where he wanted a better process for himself. We all kind started trying it in the office and you know, friends and family and some retailer in this case, Meyer I in the mid west, decided to take a chance on us.

Okay. So

MPD: do you, so you were helping him at venture for America then jumped on as this thing got real?

Mike Tarullo: Yes. I'd like to say that I moved out of the house and into the garage, so

MPD: yes. I love that. Okay. I get the pain is the mother of all invention, right? For figuring out a food you need, why chickpeas though, if all the vegetables out there, why did the, your co-founder, why did he decide to jump in.

Use chickpeas versus broccoli or something else, but it's the kind of characteristics or properties that make that relevant.

Mike Tarullo: The number one thing in food is always taste. If you're starting a food company and you can't win on taste and experience, you're not going to have a very successful company and you're not gonna be able to make the change you want to make.

And I think we can see that with the way that look beyond an impossible. You know, making meat or that as opposed to making milk is you have to win on taste first. And so chickpeas are pleasingly starchy, and actually quite neutral in flavor. And, and, and really versatile. So, you know, they're high in protein and fiber and, vitamins and minerals and stuff like that.

But they also can be tasty and neutral. Lentils are a little bit peppery sometimes. You know, other vegetables want to, it holds together. If you try to turn them into pasta, if someone tells you they're serving you cauliflower pasta, it's either emotional ally. There's, you there's this there's only certain foods that are worked for certain applications.

So for us chickpeas was just the best choice and that's why we stuck with it in addition to those, health and environmental reasons.

MPD: And is it tastes like. Or does it taste more like a different thing that's of chickpeas for people listening when they buy it? Is it just get rid of the pasta and use this and it's healthier or is it at another product?

You

Mike Tarullo: know our, our goal, what we tend to find is if you don't tell someone what it is they're quite likely not to notice. Now some people have discerning palates or they don't serve their pasta with sauce. And then there's a higher chance that they would notice. We have generally found that the majority of people, It said people say, oh, I tricked my spouse or I tricked my kids and we don't necessarily recommend that it can be a little bit cruelty to trick someone into eating something they didn't expect to.

But we do think that, when we create alternatives, we want them to replace the thing that you're eating. We want to beat your Tuesday night pasta, your Thursday night pizza night. Like we want to fill that role for you. That said, I want to take nothing away from the wonderful pasta and pizza restaurants around this country.

You know, make stuff in house and stuff like that. No, no problem with them doing that, nothing wrong with pasta and pizza. We just think we can make it a little bit more

MPD: nutritious. And you guys are currently selling it through a retail channels. It's not mainly an online distribution. We

Mike Tarullo: are vast majority of retail.

MPD: Okay. And have you guys looked into going to the quick service restaurants, their chains, and saying, Hey, swap out your pasta for us.

Mike Tarullo: No, we actually just launched our pizza crust in a a small chain called oath pizza, which is our first foot into that world. It's something we had been intending to do a while ago, but of course the pandemic put a serious delay on extension and change in the food world.

We do think that restaurants, colleges, and universities, corporate cafeteria is K through 12, hopefully someday. If we can get the legislation those are all places where we can introduce a healthier great tasting alternative. And it's, it's, it's, it's allergen friendly also, which is increasingly consideration.

So

MPD: I know you guys have recently expanded the products. Did you mention earlier you've got pizza, Mac and cheese and rice. Yes, which was interesting to see what's the bigger thinking here about where the product and business goes from this point.

Mike Tarullo: We, we have a bunch of ideas. I think, you what we've started with is mealtime comfort foods.

we find that dinner is like one of the hardest meals for people to figure out what to do with every day. And you need an answer. And it's healthy and it's tasty and that everyone in your family will eat. And that's a very difficult combination. You as a father, I'm sure notice that it can be a wrestling match.

And so we're, yeah we're focused on those like realtime staples comfort foods, foods that people already love, and we want to make them out of chickpeas. And if there was a more suitable bean or like we would use that. That said from there, there are a lot of different places we can go. You know, we've been one of the things that we believe is that the principles of the Mediterranean diet or good tenants to live by, we think there are a lot of other foods you can continue to make out of beans and chickpeas.

We've got some interested in stuff in the pipeline and of course, where we're moving into different channels as well. Like we were just talking about food service. So getting outside the grocery store and you know, other ways where you could get you know, the basis, in EGR

MPD: now that you guys have a few skews, have you figured out what products sell best?

Is there, do they all work or is there some lesson you've learned around where people buy replacement foods? I have this theory that some people just want comfort food to be comfort food at some point. So where does it.

Mike Tarullo: And I think that's, to me, that's like the Tuesday night dinner thing like people are gonna are going to eat like indulgent foods the stuff they love.

And, and I think, what you find is most people are seeking some sort of balance, but balance is actually really hard. Balance means like a constant state of time. And when you talk about balance, like it's a good thing, but imagine holding balance and then that just being like your permanent state of living.

And that's what most of our relationship with food is like, I know I'm like constantly making trade-offs and like counting things and I've been doing this for like longer than I can remember. And I think a lot of people, or at least people who are intentional about how they eat, think that way also.

So for us, We say, Hey, we want to be an easy sell for that, but we're not trying to be the only food you eat, like we're not failing out here. We're not saying replace all your meals with this one thing. We just want to be kind of part of the fabric and a go-to and a reliable staple in your pantry or your freezer, or you say, Hey, here's dinner.

We were surprised to find that we sell. I'm sure we sound great in the whole foods of the world. And they've been a terrific partner for us, but there's a wide range of different stores and places where we can do great. You know, we have a great business and target and Proger and Walmart as well as, like strong regional grocery store.

So it's really. Eating healthy and solving beginner problem is like a national thing. It's not just a thing that, people in certain areas for a long time, we were surprised that we didn't have as much of a concentration, on the west coast, as you might've expected that it was like, Hey, the Midwest was really strong.

Texas was really strong. And so it's been fun to see this be a distributed national shift in how we eat. And we think a lot of that is generational.

We are 50 on the corporate side. And about 90 on the factory side, we own our own me.

MPD: Okay. I'm going to get into all that. One of the reasons I asked that is, I think about know 50 plus person company on the corporate side, getting distribution to 18,000 stores for the would be food entrepreneurs listening.

How do you do that? How do you start get from a product? To getting onto a shelf to getting on to many shelves. What's the method. Are there brokers? What's the brass tax house.

Mike Tarullo: Yeah, that's a great question. There's probably no single right answer, but our answer is a team of people. None of whom had worked in food before.

You know, our first 15 or 20 employees, nobody had done this and we wore that as a badge of pride. If that like classic entrepreneurial outsider, I'm going to do something a way that no one else would've thought to. And sometimes that made it much, much harder on us, but I think on balance, it made it easier.

We assumed like the traditional broker and sales structure and, just like in any company, your early team should go do a lot of the direct selling themselves and you're going to do a lot of it through hustle. So we found we would just go out to trade shows and we would just bring.

There would be like our entire team, which at the time would have been five or 10 or 15 people just like bouncing up and down, running through the aisles of these trade shows. You know, yelling at buyers for these grocery stores, when we would see their name badges in Iowa, running samples up to them and that sort of thing, scrappy energy will go a really long way.

Most people are still afraid to like, make the call, do the thing. And the other thing we did is just network our way to people. Not even through professional networks, often through cold calls. And you know, you can literally sometimes this call or retailer and ask for somebody's contact information, get it.

Or you can send them a message on LinkedIn, or you can ask a friend of a friend and over time, I think we started to shift to getting warm intros instead of just blowing people's socks up wherever they were. But certainly at the very beginning, do not be afraid to dislike, get your product in our people and telling your story and safety.

MPD: Is there a trade show in particular you recommend for folks to get to get.

Mike Tarullo: Yeah. Natural products expo west and east are the best shows or new innovation. There are many others, but those are the ones where we'd met a lot of people.

MPD: Okay. And when you blow someone up, whether you're going through LinkedIn or you're scouting through their receptionist or whatever's going on do you follow up?

What does it move? Do you send a product? Do you call them? You get from cold to, yes.

Mike Tarullo: You have to have a chance to both get them, to try the product and to tell the story of why you're doing it. And in food, those two things are so linked. You know, it's not just a transaction. They need to understand because the consumer is going to make an emotional decision in the store about why they're buying the thing.

They want to see so much more like retailers want to see like the details of your marketing plan. If the craziest thing I'm like, yeah. If people are buying this, why do you need to know that? But it's because they're thinking about your future too. And I've been pretty pleasantly surprised by like how seriously buyers take their jobs, buyers and the people at the grocery stores who choose what products go on your shelf.

How seriously they take their jobs in terms of understanding the brands and the why behind them. And you know, I think there's also credit due to people for trying to make purchase decisions that way. So you have to get them to taste it and you have to get a chance to tell them their story.

And that just means for that.

MPD: And so how do you get them to taste it? You just ship them a product just sits in the mail.

Mike Tarullo: Yeah. If you're in a trade show, you can crop it to them. And if I hand it to them you know, we did that with regular people too. I can't tell you the number of Saturdays that we sent at, like ShopRites in New Jersey, just like serving samples.

You know, like that kind of thing is how you get feedback from people, hear what they like and what they don't like, what pitch works best. And then, you can, you if you got a chance with a retailer, you do everything you can to make it successful, including getting out.

Feet on the

MPD: street. When you're at a ShopRite in New Jersey, giving out samples, did you guys just show up or do you get permission from the gentleman? How does that work? Permission? You're already on the shelf at that point, already gotten the buyer to say yes. And then you called the buyer and said, Hey, we want to demo some product.

Mike Tarullo: Yeah. Or there's somebody at the organization, it depends on on the chain as to how it works. Another thing you can do just to build a little bit of customer love early, back when we had an office in Detroit our team, you go to Eastern market, which is you know, this like big farmer's market and, and set up there and serve all day and, build some awareness and validation and make enough sales to try to help you.

MPD: Okay, great. You mentioned there was a traditional way to do the distribution, right? And you guys didn't know it. And that was an advantage because you went direct. Can you explain the traditional method for, so people are aware of that. What are the channels? What do they cost? Do they work?

Mike Tarullo: How does that work?

So traditionally in food. So it depends on who's doing it. If it's a big company or a small. If it's a big company, they go to the retailers that they already have the relationships with. And when I say a big company, the big food companies in America, general mills, Hormel, Nestle you know, that Unilever on and on, they can all basically go to a retailer and say, Hey, we'd like you to take this.

And I don't really know what happens in those rooms because I don't get anybody into those conversations, but I assume there's a back and forth and somebody changes hands and you know, things just magically appear on shelf for us. It's not quite you have to prove that you deserve a spot.

One of the ways that people talk about building distribution around is that they they bring on a broker as an intermediary who has a relationship with those retailers and can go right into their offices and talk with them. And those folks can be super helpful for understanding the specific dynamics of those retailers for understanding what kind of sales pitch is going to work for helping you get access to data.

Things like that, but when you're really early, They don't have enough time to pay attention to your tiny little brand, but still in a few hundred thousand dollars in revenue, they need to focus on bigger brands that are doing more. And it's just generally speaking. They can be helpful. As you grow, we work with folks who are terrific now, but in our earliest days, we need to do this.

It's just you know, you can't outsource that selling when you're a CEO or an early executive or an early team member of a small company. You can't just say we're going to hire a vet and they're going to do it for us over time. As you have to build better programs and practices. You know, invest a certain amount in trade fend, and there are things like that.

You need veterans who understand how retail works, but early on, you're better off not thinking about things like slotting fees, which is the amount that you pay to get on shelf. You say, look, if we do that, we're not going to get paid well. And that works for a while. And then eventually it passed that.

W what's the inflection point in the company where it makes sense to bring on the broker.

Boy. It probably varies depending on, where you want to get distribution, we found a lot of value in working with big strategic accounts and having brokers on those accounts because they were just so complex.

The, some of the largest accounts in the country, those are the ones where there was so much, we did it now and we could do enough business through them to make it worthwhile. There are some folks who say it's really great to get a broker force out there, to work with mom and pops. We still haven't done that much independent grocery work because even though 50 people sounds like a lot of that growth Russ was in the last couple of years.

And, when you have a 15 person team, you just really can't spend the time running down all those small individual accounts. You know, you look at it either way. I think opinions vary. I think our opinion is we try to take on anything you can take on yourself and you find strategic voices and advisors where you can get them.

And sometimes those are brokers and sometimes those are investors and sometimes those are just like friendly people in the food industry. Yeah the voltage Avani, we went to the incubator program two years ago and they have just been like terrific at helping us understand how the industry works and helping us see around corners and not, walk into Walmart and say something really dumb.

MPD: Got it. It sounds like it's a very delicate process.

Mike Tarullo: Yeah, it is, but you can mess up a lot and there's still other retailers will talk to you and, ultimately it comes down to do people understand and do they buy it and into they keep buying it. You know, and I think, we've, we've made mistakes and gotten chances and it's taken us six years to build to this point, which, which feels like a lifetime, but, it's, it's, it's yeah, it can be delicate.

But I think at of, I would err on the side of doing stuff rather than overthink.

MPD: What mistakes have you made? You have some examples, things you learned for future food entrepreneurs so they can avoid them.

Mike Tarullo: Yeah. We launched Mac and cheese because we were like pasta. We have a great pasta. Know what else is awesome.

Mac and cheese. But we had, we did no consider research. We had no understanding of what people needed in the category. We launched it with rainbow colored boxes that totally lost this like signature bombs, orange that we had. That is. And so for a year, it just sat there and nobody knew what it was.

We had no money to put marketing behind it. It was in very little distribution. So even if we could have spent money against it you know, what were we going to do? Do like billboards, do digital ads like that. Isn't really, necessarily how people do most of their grocery shopping when you're really little.

That's not how you find out about new products. So we let it sit for a year. And then we said, we need to go back better, understand the customer. You know, strengthen the product and fix the packaging and kind of say, Hey, what is it? What problem are we solving for people? And so you can't let, Hey, we can make a good version of this.

Be how you innovate. You need to think about what problem are we solving for people and make sure that you're positioning it that way accordingly, all the way to the packaging and the retailer and the marketing, every

MPD: piece, it sounds like the customer development side of the world applies to food.

It does. It does

Mike Tarullo: honestly, the amount of research that we do I think has been the more research we do, the better we feel about what we're doing. We did research for a new category last summer and we were all so convinced it was where we were going to go next. And then the research came back and the answer was well, everybody's pretty satisfied with what they're buying they're now in that aisle.

And we said, okay I guess we ship it. And, Thinking about that because I'm like a tech product. You can just ship it and then be like, and let's see if it works and then we'll pull it off the production server as soon as it's not a good feature, right? If you can't like AB test quite as cleanly you have to go in, when you do stuff, you have to commit and put your energy and your passion behind launching the right product.

And so I think that's been an adjustment for me coming from slightly more of a tech background. We can't just try a bunch of stuff. Like you have to say, Hey, let's make sure that people are excited about this. So we do a lot of sending products to people in their homes and getting home usage tasks and finding out how long they cook it and what they thought of it and what worked and what didn't and, adapted.

Can

MPD: we drill down to that a little bit? So if I was to start a new food product, and you said the word research could mean a lot of things, and it's probably different for tech companies and for food companies and for everything else. What would you actually do brass tacks? What is it? You're mailing the food out.

You're standing on a corner. What is the research method for you guys? You hire a firm.

Mike Tarullo: Yeah, the first thing you're going to do is start with your product and make sure that people like it and that they understand it. And you're going to figure out how you're talking about it too. So that could be literally getting out you at a.

Some sort of place where you can get a booth now, maybe your local grocery store and you're demoing in that store. And you're seeing if the words you say lead somebody to walk away from your thing with it, you're seeing, who's willing to buy it and people's kids are willing to eat it. You know, like that kind of stuff.

And you just always have to start with the food. And how does it taste in this. we graduated to a lot of surveys, a lot of those just simple online surveys too at first kind of friends and family folks. But then we would ask everybody who signed up on our website to buy a box.

We sent an email around saying, Hey, do you want to join our little squad and participate in the occasional research thing that we said. That helped us get insider feedback. And then of course you can use those platforms to reach different, demographic groups or behavioral groups, or what have you to just understand if what you're doing is fascinating at all.

You're never really gonna know until you figure out how you're going to execute it and retail, but that can help you a little. And I would caution against using e-commerce, which is the traditional validation platform for people like all these clothing companies that pop up in your Instagram feeds and all these different products for your home and whatever, like all that stuff, they can do it that way and it can work well.

That way, grocery is still primarily the in person transaction. You go into the store and you look around and you buy stuff and you can't draw too many conclusions from what sells well online and vs versus what sells well.

MPD: One of the things I've always found as an entrepreneurs. If you walked down the street or maybe through your school, or, at a family get together and you tell them about your new business idea, everyone says, it's awesome.

Even if they're thinking that's fricking terrible, right? How do you get real candid truth from the customers when you're doing these feedback cycles? So let's say you've got a hundred thousand customers, 10,000 sign up to be Guinea pigs. You send them your new Mac and cheese. Do you call everybody? Do you give them an an online form?

How long has the farm, but have you learned about ensuring kind of truth and real signal comes out of the data?

Mike Tarullo: So everything has to be blind to the best of your ability. And it's hard if you're making something brand new that nobody's ever seen before. We actually used university research partners to do blinded studies for us early on.

They have been really like, pretty great about it. And you can also do that. Get different universities around the country can do this kind of thing. And they're also different firms that can do it. The end, all of them will help you design it in an intelligent way. But even before we did that, honestly, in the aisles of a grocery store People actually will just tell you what they think.

Usually very rudely if they're having a bad day, so you have to have thick skin, especially if it's your babies, you gotta say, Hey, it's chill, a hundred people like it. And then I'll just put that in. That's fine. You know, we found though over time you always have to have a benchmark.

What are you compared to? It's not, do you like this? It's which of these do you like better and which attributes, texture and flavor, and you know, cooking experience and whatever. And what did you think of that? And if you can blind your respondents to what they're testing, then you're going to be able to get interesting results.

That'll at least tell you something.

MPD: Okay. But at the end of the day, you're gonna have to make a judgment. Yeah, you get some data and you're going to have to say good enough. And this is one of the areas where I think a lot of entrepreneurs make a big mistake, right? They get data back that says, man, not that great on whatever they're working on.

And a lot of people just they're so vested. They put so much energy. It's their baby to use your language. They're so committed to it that even though the data's saying run they keep going forward and jump in. How do you stay disciplined? About really hearing the day.

Mike Tarullo: No, I think that's a great question.

I think one of the things that we've done right, and that I really, I ascribed to you know, Scott, one of our founders is he always wanted to reign in new distribution. And I think this is a really healthy way to build a business is to say, go everywhere and take every sale that you can take. There are certain retailers at certain times, you might not be able to support.

Or you might, you might not be able to manage effectively or that you might not have the resources to invest in, or that might not, you might not be able to build the awareness to drive the velocity that you want in Publix in the Southeast, across 1100 stores when you've only been in existence for a year and a half.

So we said no to as much or more distribution than we said yes to you in our early days. And we tried to make sure that we could fully support whatever we went into. What you have to try to do is say, okay, let's imagine we get this. How is it going to actually sell? How is it going to actually work?

And it's the same thing. Again, it's true with software where some customers require too much custom work. They're too difficult. There are too many. You're going to have to change your whole, your whole like product development pipeline, just to suit them. You can't do that. You have to try that early.

And I think we just got into habit early of saying no. And so I think we still have recognized, Hey, every single product launch risks are good name. Not just with, retailers, of course with retailers, but really with people. Yeah. If they try bonds and stuff, and we don't like how it tastes or you know, it just doesn't work for them.

Then we have lost something. And so early on, we could take more risks at times. We've improved our hostage three or four times since we launched it. Like we keep you know, subtly improving what we're doing or, our process of making it. And then what have you. And I. we have the guts to launch something that wasn't perfect at the beginning.

And that was important for just getting out there. But over time you have to be more in, more and more disciplined about what you do. And again, continue to say no to more things than you say yes to.

MPD: It goes against a little bit of conventional startup wisdom. Candidly, the phrase we all use is fuck it, ship it right.

You get it out there to get feedback. You start