Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is Bloomberg Business Week with Carol Masser and Tim
Speaker 2: Stenovek on Bloomberg Radio.
Speaker 3: It's five o'clock somewhere.
Speaker 2: Oh well, it means red wine, right exactly, or a
Speaker 2: little red sauce. I'm thinking, you know the Marinara sauce
Speaker 2: aisle at the grocery store these days, Carol, Yeah, not
Speaker 2: what it was like when I was a kid, where
Speaker 2: it was like all classico and prego.
Speaker 4: Remember that it really was.
Speaker 3: Can I just wait before you go on? I'm just
Speaker 3: gonna say it. My mom was always made homemade.
Speaker 1: Wow.
Speaker 3: I know I was spoiled, but go ahead, go on, Wow,
Speaker 3: go on, because not everybody shade to Susan Stemine. Here's
Speaker 3: also a stay at home mom for a while, so okay,
Speaker 3: she could do that.
Speaker 1: Well.
Speaker 4: The isle has moved up scale with more botique options,
Speaker 4: including REOs and the sauce from our next guest company.
Speaker 4: Eric Skae is CEO at Carbone Fine Food. It's the
Speaker 4: maker of Marinera spicy vodka, tomato basil arabiata. You like that?
Speaker 3: Wow?
Speaker 4: I practiced that one early Alfredo and more.
Speaker 3: Eric joined He disappeared for like an hour or so.
Speaker 4: It was just holding a bottle in the Bloomberg Interactive
Speaker 4: Brokers studio. Eric, good to see you. Okay, Carol and
Speaker 4: I were talking about this Carbone Fine Foods. Right, Carbone,
Speaker 4: the restaurant which is owned by Major Food Group. Let's
Speaker 4: start there. What's the relationship. Just settle the score for it.
Speaker 1: Major Food Group is majority owners of Carbone Fine.
Speaker 4: Food Okay, and inspired by the.
Speaker 1: Restaurant, inspired by inspired by the.
Speaker 4: Restaurant, Yes, what you get in a jar at the
Speaker 4: grocery store from Carbone? MARINERA, Do you get that at
Speaker 4: the restaurant Carbone?
Speaker 1: Yes, I mean as close representation as you can make good.
Speaker 1: That's the IP commercial kitchen. Absolutely all fresh ingredients. Tomatoes
Speaker 1: from Italy, onions are chopped on site, Garlic's minced on site,
Speaker 1: basil his hands stripped on site. As we produce a
Speaker 1: product and it cooks for an hour to an hour
Speaker 1: and ten minutes, meeting your homemade taste. What we look
Speaker 1: for strount quality, and Mario Carbone is very passionate about that,
Speaker 1: so he tastes everything.
Speaker 3: I kind of love it when I roll over the
Speaker 3: ingredients and what you're seeing is everything I understand, and
Speaker 3: there's no chemicals, there's no nothing like that. I mean
Speaker 3: that to me is super important. How do you, though,
Speaker 3: make sure that it is as good as the restaurant?
Speaker 1: So I mean, look, we're very, very involved in the
Speaker 1: manufacturing of this. So the first year I tasted personally
Speaker 1: every single batch before it was allowed to go on
Speaker 1: a jar. Obviously I have a staff. Now how to
Speaker 1: go one hundred thousand miles on United without leaving the country.
Speaker 1: I live in Las Vegas, so that's my fault.
Speaker 3: How many times did you taste something You're like, nope, nope, nope.
Speaker 4: It sounds like a.
Speaker 1: Lot, not that often because I work with people that
Speaker 1: I trust that are very very good at doing this.
Speaker 1: It's a very specialized process. No one wants to cook
Speaker 1: for an hour in a manufacturing facility, so those who
Speaker 1: do it are as passionate as I am about it.
Speaker 4: How do you control that? Because I mean, I would
Speaker 4: imagine you have manufacturing in several parts of the country.
Speaker 4: It's not necessarily centralized in one place. Ingredient variabilities based
Speaker 4: on seasons, and those tomatoes that you do get from Italy,
Speaker 4: how do you control for those things?
Speaker 1: So the tomatoes you get from Italy, you're going to
Speaker 1: be fairly consistent. They come in, we open up number
Speaker 1: ten cans, just like the back of a restaurant. So
Speaker 1: or it's not big drums to the tomatoes. They're packed
Speaker 1: just in tomato season, and that's tomato we use. So
Speaker 1: I mean to your point, I might be able to
Speaker 1: take us taste a slight variation in fresh basil because
Speaker 1: it was hand stripped at a different time. We've never
Speaker 1: gotten a complaint.
Speaker 4: Is it in different parts of the country where where
Speaker 4: you do many where you actually do the manufacturing.
Speaker 1: No, most of it's here in the East Coast. We
Speaker 1: have a couple of cop packords set up that that
Speaker 1: we work with, but we have a primary that does
Speaker 1: a good majority of it.
Speaker 3: All right, great bottle carbon name very prominent. Why are
Speaker 3: they doing this? Why do they need to do this?
Speaker 1: You know that would be a that'ld be a question
Speaker 1: for for Mario Mario, but you know, as I've seen
Speaker 1: him ask that question, he's got X amount of restaurants
Speaker 1: and not everybody can get to his restaurants, and people
Speaker 1: want to get there. Yeah, so you wanted to put
Speaker 1: something in the jar that represented the restaurant and allowed
Speaker 1: people to taste the experience of carbone and that's why
Speaker 1: we're so passionate about what goes in that jar, tasting
Speaker 1: better than anything. Our recipes on our site were developed
Speaker 1: by carbone chefs, so and we've kind of kept them
Speaker 1: simple so the home cook can make it, but they're
Speaker 1: really good recipes.
Speaker 3: Does it create a significant revenue stream potentially? I mean,
Speaker 3: you understand this industry, we didn't. You know, you're former
Speaker 3: CEO Raos. You know someone who's been in the food
Speaker 3: and beverage, but you know area for a long time.
Speaker 3: Is it something though, when you have a name that's
Speaker 3: known that you can build a significant revenue line?
Speaker 1: Yeah? Yeah, I mean we just finished our third full year.
Speaker 1: We've done eighteen million jars since we launched. We're in
Speaker 1: twenty four thousand accounts and we're the number seven brand
Speaker 1: in America, number two in natural foods. So it's went very,
Speaker 1: very fast, and it is in large part because we
Speaker 1: had a name that we could leverage from a from
Speaker 1: an awareness standpoint. You know, awareness was not massive in
Speaker 1: the Middle Midwest, for example, but it was known by
Speaker 1: a certain by enough people to start something. Yeah, and
Speaker 1: then you know, then the blocking and tackling happens of
Speaker 1: building a brand.
Speaker 4: Okay, so this is not your first rodeo, as Carol mentioned,
Speaker 4: your first red Sauce rodeo twenty sixteen to twenty eighteen
Speaker 4: CEO of REOs. That was the period it was acquired
Speaker 4: by Sovos for more than four hundred million dollars. Then
Speaker 4: a couple of years later I believe it was what
Speaker 4: twenty twenty one, twenty twenty four, Yeah, twenty twenty four, Yeah,
Speaker 4: when it Sovos closed its acquisition, or when it Soils
Speaker 4: was bought by Campbell's for two point seven billion dollars.
Speaker 1: Yeah.
Speaker 4: Obviously some some big growth in the space over the
Speaker 4: last few years. What do you see as driving the
Speaker 4: growth and how much growth is left? And sort of
Speaker 4: the premiumization.
Speaker 1: I think it's significant because of the premiumization. You know,
Speaker 1: Reo started that trend when they put the first jar
Speaker 1: on the shelf in nineteen ninety two, So if you
Speaker 1: think about it, it's a long time ago. So this
Speaker 1: has been a long slow build the consumer. And you
Speaker 1: think about other categories like craft beer, right that premiumized
Speaker 1: years ago. So ice cream premiumized with Ben and Jerry's
Speaker 1: years ago. The premiumization in every category is happening. Pasta
Speaker 1: saus finally got its turn, you know, around twenty fifteen
Speaker 1: twenty sixteen where it started to really really drive from
Speaker 1: a premiumization standpoint, and people are just looking for healthier,
Speaker 1: better ingredients.
Speaker 3: Listen, I can't tell you. I've got a twenty one
Speaker 3: year old and the same thing. We turn everything around
Speaker 3: and we want to know what's in it, and we
Speaker 3: want to make sure we understand the ingredients. I am
Speaker 3: curious how big you think it can be, how big
Speaker 3: you want this brand to be? And is it a
Speaker 3: case of you're going to follow the model of selling
Speaker 3: it off at some point?
Speaker 1: You know, there's no decisions made. My partners are young, Jeff,
Speaker 1: Mario and Rich are in their forties. Right, I'm the
Speaker 1: old guy in the room, and I love what I do,
Speaker 1: So I'm in no rush and I actually I would
Speaker 1: have never envisioned doing a startup. I went from REOs
Speaker 1: to another run where I took a company through an exit,
Speaker 1: and I didn't want to do that, so that's why
Speaker 1: I went to startup. So we don't have a timeline.
Speaker 1: We believe there's a tremendous amount of growth, not only
Speaker 1: in Sauce, but in Italian like we have a platform
Speaker 1: brand that I could if we wanted to go beyond.
Speaker 1: We see a significant amount of growth in sauce in
Speaker 1: the next two to three years. So I'm not doing anything.
Speaker 1: I believe in maniacal focus when something's working. So it's working.
Speaker 4: Eight to ten bucks roughly give or take you for
Speaker 4: a jar. Are you seeing any pushback from consumers on
Speaker 4: higher price stuff as we speak?
Speaker 1: Not, I mean not that I'm seeing. I mean, of
Speaker 1: course people will make comments, you know, friends, friends in general,
Speaker 1: or my brother who wait still it's on sale to
Speaker 1: buy it, but probly, But for the most part, I think,
Speaker 1: I mean, come up, I think Rayoss. I you know,
Speaker 1: I give Rayos a lot of credit. And the people
Speaker 1: before me who built Yos slowly and painstakingly, right, they
Speaker 1: really did a good job, and they built a model,
Speaker 1: and they built they built the category so that eight
Speaker 1: to ten is not sticker shock for everybody anymore. It
Speaker 1: is for certain people, and I get it. But once
Speaker 1: you try that product, the amount of care we put
Speaker 1: it into what goes in that jar, it's worth it.
Speaker 4: Here's a problem, Carol, what feeding your kid the pasta
Speaker 4: sauce that you buy as adults, because then they get
Speaker 4: hooked on it, and then you find yourself in situations
Speaker 4: like us ordering huge jars and then they're like, I
Speaker 4: want you know, the.
Speaker 1: Right, that's a problem.
Speaker 4: I mean, that's the expensive pasta sauce. And that's the thing.
Speaker 3: I mean, not every pasta sauce is the same, no
Speaker 3: doubt about it. How do you manage the growth or
Speaker 3: the expansion of the brand in a careful, thoughtful way?
Speaker 4: And do you need to?
Speaker 1: Yeah, of course I do. I think brand is everything,
Speaker 1: so you have to make sure it's working before you know.
Speaker 1: If you've got an initiatives and something's not working, fixed
Speaker 1: that before you moved to the next thing. Right, We
Speaker 1: grew fast because it was working. But had I saw,
Speaker 1: you know, some resistance, I would have worked on figuring
Speaker 1: out that resistance before I expanded. I started. I started
Speaker 1: in the Northeast, and my intention was to stay there
Speaker 1: for eighteen months, But within eighteen months I was national, right,
Speaker 1: and I didn't expect that the intention was to go slow.
Speaker 1: I didn't expect it to go as fast as its.
Speaker 3: Stores were asking for you guys, or.
Speaker 1: What we had stores asking for us. We had, Yeah,
Speaker 1: I mean all everything. You know, the customer that I
Speaker 1: thought would adopt it immediately took a year and a half,
Speaker 1: which was Whole Foods. But you know, we were we
Speaker 1: started in twenty one. Yeah, pandemic, luck going on, buyer changes,
Speaker 1: you know, so on and so forth. So it took
Speaker 1: a little longer with that particular chain. But now if
Speaker 1: you go into Whole Foods, were very well represented.
Speaker 4: Hey, one thing I noticed about your career is you've
Speaker 4: been in this industry for decades at this point, and
Speaker 4: you started off. You've really rode the wave of different
Speaker 4: tes ends at different points in your career, like the
Speaker 4: juice is in the early part of your career, like
Speaker 4: Fresh Samantha's Naked on Wallas and those sorts of things,
Speaker 4: and then popcorn rayos a little later in your career.
Speaker 4: What's what's the trend that you're seeing play out right now?
Speaker 4: Sort of the next trend?
Speaker 1: It's really hard to say. In today's world. It's gotten
Speaker 1: it's gotten muddy, but any anything that's going to be
Speaker 1: higher protein is on point. You you know, you did
Speaker 1: a segment on GLP once that's going to drive I
Speaker 1: think new innovation. That's really right and healthy innovation. I
Speaker 1: everything points to at least the doubling in usage in
Speaker 1: a last in the next call it five years, and
Speaker 1: the households that are on it, they're actually showing a
Speaker 1: decline and how much they purchase a grocery stores. So
Speaker 1: it's interesting much bigger decline and convenience stores because if
Speaker 1: you think about snacking, right, that's that's what's going to
Speaker 1: get hurt, right. I think good food is always going
Speaker 1: to do well. That's that's the way I look at
Speaker 1: healthy food because those people, I you know, just having
Speaker 1: interviewed a couple, they tend to get healthier. Some of
Speaker 1: them tend to get healthier at the same time necessarily
Speaker 1: are looking for better ingredients.
Speaker 4: Is it like the visceral reminder that you're stabbing yourself with,
Speaker 4: don't know, a pen I think, you know, I.
Speaker 3: Know initially from folks who've done it too. I mean,
Speaker 3: they don't like the taste of food, right, and so
Speaker 3: they kind of, I don't know, they almost kind of
Speaker 3: go through a little bit of a cleansing to some
Speaker 3: extent and think, I don't know, it's just interesting.
Speaker 1: To watch that could be. I do have a daughter
Speaker 1: that is using it and that when I say I
Speaker 1: interviewed someone, it's close close to me. Yeah, but you
Speaker 1: know she's like at Barry's boot camp in the morning
Speaker 1: now and like, you know, really healthy, which is great.
Speaker 3: You do wonder if it's a case of and not
Speaker 3: necessarily for your daughter, but others who tried to lose
Speaker 3: weight couldn't lose weight, or whether it's because you know,
Speaker 3: they're diabetic or whatever. And finally, Ken and I think
Speaker 3: it feels really good. They feel so much healthier, and
Speaker 3: I think one to kind of stay in that place
Speaker 3: would be would be my gut. But so I'm curious
Speaker 3: if GLP one is really ultimately the driving force and
Speaker 3: a lot of the food companies. Is it upstarts that
Speaker 3: all of a sudden become the giants or do the
Speaker 3: giants have to buy the upstarts because they've got to
Speaker 3: catch up and they evolve, they're disrupted, Like, how do
Speaker 3: you see that playing out?
Speaker 1: I think it's all the above. I think you have
Speaker 1: new product development going on in big food already, would
Speaker 1: be my bet. I mean I don't know that certainly,
Speaker 1: but that would be my bet. And they're going to
Speaker 1: look at upstarts because sometimes buying growth is easier than
Speaker 1: creating it.
Speaker 3: So what about the beverage space. We've been talking a
Speaker 3: lot about non alcoholics, a kind of a tease for
Speaker 3: some of our conversations on our weekend broadcast, but we
Speaker 3: are increasingly we often, do you know, no joke, a
Speaker 3: wine segment on Friday or a liquor segment, and we've
Speaker 3: already had a couple of non alcoholic guests.
Speaker 4: Yeah. Ours section in our Bloomberg Business Week the year
Speaker 4: is it the yearhead issue or is it it's just
Speaker 4: like kind of preview. I'm not sure which is well. Anyway,
Speaker 4: there's a huge section on nonalcoholic drinks, and the innovation
Speaker 4: that's happening there is pretty incredible. Are you seeing that
Speaker 4: among the folks you are? You know, you're kind of
Speaker 4: in the part of a group where you've been innovators
Speaker 4: in the food industry for the past twenty twenty five years.
Speaker 1: Yeah, I mean massive, Trent. The whole move to non
Speaker 1: alcoholic is really being pushed by gen Z who's just
Speaker 1: not drinking as much and you know, having kept in touch,
Speaker 1: which at a lot of folks. I know in the
Speaker 1: beer industry, I sold a lot of beer distributors and
Speaker 1: have a lot of friends that sell beer distributors, they're struggling.
Speaker 1: I mean when I say struggling, it's struggling for growth. Yeah,
Speaker 1: you know, I can't say their businesses is struggling. It's
Speaker 1: just they're not selling as much as they used to
Speaker 1: and they're having to make the necessary changes to that.
Speaker 1: But a lot of them are getting into non elk
Speaker 1: in a big way.
Speaker 4: I mean, Consolation Brands lost almost a fifth of its
Speaker 4: value recently when they miss quarterly sales es cements citing
Speaker 4: lackluster consumer demand. I mean that's a big deal.
Speaker 3: Yeah, this gentleman next to me, my co host, I mean,
Speaker 3: you're a non alcoholic.
Speaker 4: Yeah, folks, Yeah, it's the part that group. And I
Speaker 4: noticed it among friends too, where everybody's drinking last at
Speaker 4: this point. So back to Carbone and the innovation here.
Speaker 4: I was pretty shocked when I was preparing for this,
Speaker 4: and I went to the website to see just how
Speaker 4: many varieties you have of this? Is there a plan
Speaker 4: to push beyond red sauce or is it just variant
Speaker 4: variations on the red side.
Speaker 1: So we're in red already, we're in white already. So
Speaker 1: we've got Alfredo's on the shelf, and five of them
Speaker 1: in Whole Foods. They all haven't been announced. Red. I
Speaker 1: think I still have ideas, So there's going to be
Speaker 1: new reds, Like we just launched one. Putinesque is a
Speaker 1: famous Italian sauce, but it just doesn't sell any United States.
Speaker 1: People don't understand the word, and anchovies are pro polarizing.
Speaker 1: So I created Mediterranean Marinara, which is what alos and capers,
Speaker 1: and I took the anchovies out and we took the
Speaker 1: name off and we're going to see how it does.
Speaker 1: It's on the shelves in one retailer right now. An
Speaker 1: initial initial pull looks very strong, so you know, we'll
Speaker 1: see where that goes. So White will be a definitely
Speaker 1: a drive Pesto will be in the future. I have
Speaker 1: some I have something in that I'll announce at some point.
Speaker 1: Give us a little bit that it is going to
Speaker 1: going to be interesting in the RED space.
Speaker 5: But you're still in sauces, not for the foreseeable future,
Speaker 5: because if something's working, why would I dilute the focus
Speaker 5: of my team, myself, my chef.
Speaker 1: You know, we have a full time chef that to
Speaker 1: develop things for while.
Speaker 3: I mean, you look at the website right too. And
Speaker 3: you do have, you know, some little gift sets that
Speaker 3: you do that you can buy with some pasta.
Speaker 4: Is that apparel selection too?
Speaker 1: Yeah?
Speaker 3: Yeah, I mean can do you expand this out to potentially?
Speaker 1: So I got to tell you, Mario Carbone designed that
Speaker 1: apparel and it's amazing and and like the celebrities that
Speaker 1: have been seen wearing that apparel so far, it's it's
Speaker 1: a great marketing tool. You know, Mario himself is a
Speaker 1: fashion designer, so it's a it's just really been helpful
Speaker 1: to us. So I say, us doing a little there.
Speaker 1: I don't think if it will never become a primary business.
Speaker 1: The gift sets will never become a primary business. But
Speaker 1: there are when you when you get a gift and
Speaker 1: this Carbone and it reinforces the brand.
Speaker 4: Hey. You know, I think a lot of people see
Speaker 4: Carbone in the grocery store and they equate it with
Speaker 4: REOs and sort of that same level of premium. Contextualize
Speaker 4: for us their scale versus your scale right now, and
Speaker 4: to what extent you're sort of nipping at their heels.
Speaker 1: You know, I mean, they're likely at this point I
Speaker 1: have to I have to do some math. But you know,
Speaker 1: eight times bigger than us in sauce, nine times bigger
Speaker 1: than us in sauce. We It's interesting because initially I
Speaker 1: thought we would be pulling a lot from Raos, but
Speaker 1: we have a gen Z millennial millennial consumer. If you
Speaker 1: think about my if you think about the owners of
Speaker 1: the company, they're in that that age group. If you
Speaker 1: think about how they hit pop culture, right, everybody wants
Speaker 1: to go to Carbone and then they talk about it
Speaker 1: when they go to Carbone. So we've get all of that,
Speaker 1: that that awareness from the restaurants, and it is to
Speaker 1: a younger consumer. So I don't think we've bothered Rayos
Speaker 1: at all. I mean, as a matter of fact, their growth,
Speaker 1: given their eyes, is still very strong. Wow. So and
Speaker 1: you know, I mean, look, we're the fastest growing in America,
Speaker 1: but we're six spots behind them in the list right
Speaker 1: So yeah, uh, you know, my goal is my goal
Speaker 1: is to get there one day.
Speaker 3: What are you having for dinner tonight?
Speaker 1: What am I having for dinner? I will be on
Speaker 1: a plane.
Speaker 4: I knew I was going to say, we have to
Speaker 4: let him go.
Speaker 1: He's got a probably probably a cliff park.
Speaker 3: Are you.
Speaker 4: I'm so sorry all that flying from Vegas. It's not
Speaker 4: even a hub, so you're you're just doing a lot
Speaker 4: of connecting flag United Work's not that it's correct.
Speaker 3: Keep keep us up to date. When you're ready to
Speaker 3: talk about the next thing.
Speaker 1: I will, I will for sure. I mean, we always
Speaker 1: have development going on and it would be great to
Speaker 1: let you know about it.
Speaker 3: Thank you so much, CEO of Carbone Fine Food joining
Speaker 3: us right here in our Bloomberg Interactive Broker studio.
Speaker 4: Thank you.