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