Laura Modi is the founder and CEO of Bobbie, a company that makes baby formula and sells it directly to parents. Laura’s problem is this: how do you launch a startup in a highly regulated industry that has pretty much been a duopoly for decades?
Part of Laura’s answer is marketing, which raises another question: how do you get people to consider formula despite so much messaging that breastfeeding is better?
Pushkin.
I just went into the world of motherhood expecting that I would breastfeed, expecting it would be easy, and it wasn't. I found myself feeding my daughter formula and having that visceral feeling, that visceral feeling that I should be giving her something better, the visceral feeling that I should feel less guilty and I should feel better myself as a mother that I'm giving her food and nutrition. But something about me just feels bad about it. That hit me in a way that I knew I had to do something about it.
I'm Jacob Goldstein, and this is what's your problem. My guest today is Laura Mode. Laura is the founder and CEO of Bobby. Bobby is a company that makes baby formula and sells it online directly to consumers, directly to parents. There are a few ways to formulate Laura's problem. One is a problem about regulation and competition. How do you launch a startup in a highly regulated industry that for decades has been largely dominated by two companies. Another way to formulate the problem it's a marketing problem. But marketing in kind of the broadest sense of the word. How do you create a news story around what it means to give your baby formula instead of, or in addition to breastfeeding.
I wanted to develop a formula that US parents felt truly proud of. I wanted to combat the feeling that we were feeding them something that we weren't proud of, that parents felt guilty of. And in many ways, they were turning to an alternative solution, which was the black market.
And what black market formula? What black market formula?
You're talking about European black market?
Huh? What does that mean?
Great question?
What that means is that there was and there is many sites out there that is selling infant formula to US parents that is made and produced and seen as infant formula in Europe, but it's not categorized as infant formula here in the US. And a lot of parents, I believe. The New York Times reported several years ago that twenty percent of Brooklyn parents were importing from.
Brooklyn parents are as a Brooklyn parent, let me say, hey, I was not in that twenty percent, and be weare the worst.
It's so good?
Why why why do people in Brooklyn think European formula is better?
So it's all over and the one caution I would say is I think it is really important and also really dangerous for us to refer to anything as better or worse.
How people are doing this. Yeah, but why why why?
Because the ingredients there, and the ingredients chosen to put in formula there are often seen as ingredients of choice, and the ingredients of the parents would deam is better.
You start your company, you start making formula, and you run into this fact, this FDA regulation in a very dramatic way. What happened.
I knew it was regulated, but what I hadn't fully consumed was that there was very little wiggle room within those regulations to be creative, disruptive, or to at least take a first step towards changing them.
Yes, the FDA is not into creative and disruptive. It's out there thing.
No, two things that you'd never see come together.
And just to be clear, this is back in twenty nineteen. It's well before the formula shortage. We had a last year that was in the news, but specifically just what happened.
Specifically, what happened was I could not get product made here in the US, so I decided to go to Germany and I made my first product in Germany. The challenge was is that because we made it abroad, it didn't match the regulations in the US, meaning the FDA's rags did not see this as an infant formula here in the US. So I said, you know what, let's just put this out as a toddler formula to begin with. That puts it into a different category and it would serve it to non infants, and it's a great way to start.
And so, just to be clear, the idea is if you call it poddler formula instead of baby formula, then it's just like powdered milk or something. Then it's regulated like food and has a much lower regulatory threshold.
Exactly exactly it's food.
There was one major problem though, is that it actually was infant formula, and it would have been infant formula in Germany.
And you knew that, right. You were just trying to sort of do a regulatory arbitrage.
Basically, I was looking at this as a way to be able to get high quality formula into the hands of American parents in a way that I felt was categorized differently.
Yeah. Disruptive, yes, but this.
Was a safe, high quality infant formula that was being fed to millions of babies in another continent, and our continent would not have categorized it as infant formula. And ten days in to a very small pilot where we were only selling it to folks within our city in San Francisco, I want to say there was ninety three customers. The FDA called, not just a phone call. They came to visit our warehouse and I received a phone call from our warehouse manager, and that warehouse manager says, the FDA's here. And I in a state of disbelief because in all of our research, the FDA, until you've reached a certain size, and until there truly is a concern, they're not showing up, Like.
How do they even know you exist? Right? You said, ninety three customers?
Ninety three customers. It's a high quality infant forum.
There was no safety concerns, no issues reported, but there was some press, and that press highlighted that the company was the new infant formula company in the industry. Now for a regulated body who regulates all infant formula, this can also be a shock because where did it come from?
Who is this company? And at our warehouse they were met. I was met with very friendly.
Officials in full uniform who very quickly said you can't do this and shut us down.
And it was heartbreaking.
It was both heartbreaking and it was the first moment of just very humbly realizing that just because an industry needs to be disrupt did doesn't mean that you can just bulldoze your way through. And there's many ways to approach disruption and change. And it really was I think it was one of those first moments I was like, Okay, this is going to be a journey. This is this isn't my previous history coming from tech, this is going to be different, and it was.
I mean, the way the way you talk about it, it sort of reminds me of when Uber was starting out and there were all of these rules in different cities about UH that that limited who could provide taxi service basically, right, and clearly to me, those rules just benefited taxi services at the expense of customers, right, And I feel like that in a way was a model for what you're doing, Like, ah, there's this duopoly, it hasn't changed in decades. Come on, we're just going to do this and figure it out later. And the FDA basically said, no, you are not. That is not the way this one.
That's exactly what happened. Exactly what happened.
Yeah, and you know there's I think when you go through these things as well, Like I was looking around, and I think for any parent listening to this, you either are or you've heard of someone importing European formula off a black market. And wherever there's a black market, there tends to be an opportunity. And that's exactly as a parent at the time, importing black market European formula, You're almost looking at this going, well, it's happening in many ways, but it's not being done in a way that's meeting consumers where they're currently at. And this seemed like a different approach to something that was rampant and already happening all over the country.
So the FDA's basically shutting you down. You're a brand new company and the FDA is saying you cannot be a company in the way that you were planning to be a company.
What do you do?
So you go through an identity crisis for a hot minute, you go, who am I what's this about?
How do we tackle it. Why did I do this?
But also how else would I have done it? Because, as we all have come to learn, there was no other options for a new company to be born within the country. That is why it duopoly exists, and that is why this industry is so concentrated. There was no Yellow Pages of infant formula manufacturers here in the US. If I decided to make baby food, I would have had a choice of two hundred manufacturers to call, But I chose a hard regulated product because I believe that truly needed to change. The challenge was that the industry was not set up for a newcomer to enter, which.
Is why there were no newcomers.
Right.
It's a high barrier to entry.
But one of the things that really opened doors was that the national shutdown that we had from the FDA got public attention. And when I say public attention, it got more headlines than us launching the company.
Right, it's great press. It's almost the case been shutting you down?
Right?
So did you find that?
Like?
So?
Wait, so the FDA comes in, they basically shut you down, and then suddenly does everybody want to buy your formula that you could no longer sell?
It was half and half. It was a lot of curiosity. A lot of curiosity was coming my way on just hold on, what happened?
Why did this happen?
And it started peaking people's interest for this, Maybe is an industry to pay attention to.
And then you're right.
The other side of it was, oh, my gosh, I want to get your formula. What can we do to help? And the peaking interest in the curiosity came from two different groups that helped me figure out what path I was going to go on. The first group was an investor, multiple investors, who saw what I was trying to do, saw the market opportunity and also how regulated it was, and called me and said, I really believe in what you're doing, and I think you have the persistence to keep going.
Can I give you a few million dollars to keep going? Now?
That was the kind of phone call you want when you're in the middle of an identity crisis, trying to figure out where to.
Go, and when you just got shut down and know that you're not gonna have any revenue coming in the door for some time.
Yeah, that's right, no revenue and yet a lot of capital to get to that next phase. The second phone call was the one that really sealed a deal. And that phone call was from the only and the one contract manufacturer that outside of the duopoly in the US makes infant formula for the country. And that phone call was a turning point because I tried for two years leading up to it for them to make my formula, and I was interesting.
So this company, it's perrygo Am I saying it the right way. Err, I read it, so you're saying, and just to be clear, so they are a US manufacturer and they make lots of sort of generic formula, right like if you buy formula Costco or whatever, they make that formula. And you're saying you had been trying to get them to make your formulney and you were not worth their time. Basically, yes, they weren't really calls. We don't know what they were thinking, but we only know that they wouldn't return your calls. Yeah, correct, And then they called you. And then when this news came out, they called you.
There you go, Jacob.
That's exactly how it went down. And it's so funny when people are like, would you have done it differently? I'm like, that phone call wouldn't have come in. But keep in mind they also needed to change their business model as well, because they were used to making formula for store brands, and here I was, I had a unique formula and I wanted someone to make it. So that was also them going, huh, would we approach this differently and also take on a new incomer and do chaking on a new business model as well. So I'll never forget that call. And one of the most important things that hit me during that moment was there was a lot of support to be able to get us to the next level, not because they saw it as an opportunity, but because they saw how we handled the shutdown. And it is something I canntinue to remind the team of too. Turbulence may come very often, but it's how you handle that turbulence. And we handled it with a level of grace and managed our message and hung up our hat and said, yeah, this is how we approach the market. And it hasn't landed, so we're going to take a different path. And we weren't defensive, we didn't push back, we weren't defiant, and that landed, and that landed in a way that the respect that came from both investors and future manufacturers.
It landed tell me, well, tell me how your formula is different than that, you know big formula brands in the christ country.
So we've designed her based on and I refer to as as a her. We've designed her really inspired by European formula. So the first thing we did from a recipe standpoint was say, how are recipes designed for European infant formula? And that means you start to look at the levels. So we are the only infant formula that mirrors European nutritional standards. And put another way, there's no US infant formula where their recipe would pass the bar set for European infant formos. So that's the first thing the recipe. The second thing that makes us different is the choice of ingredients. We've chosen to leave out ingredients like corn syrup, use organic grass fed milk and not conventional milk, leave out palm oil, which is a leading ingredient towards constipation for a baby, So making it easier to digest by leaving out things like palm oil and putting in things like coconut oil. So between the choice of our fat blend ingredients and the recipe which mirrors European nutritional standards. That's ultimately the differentiator that we hang our hat on.
So I have two kids and we gave them formula. We gave them. I think it was similar, just one of the big American brands, Like should I have given them some European style formula? Body didn't exist? But if it should I have done that instead?
Absolutely not. Okay, and this, oh, I love that you're asking this because I always I always have a note by my desk to make sure that this is a reminder of something to repeat, because I don't believe that there is anything any such thing is a bad formula. And I truly mean that. And I don't just mean that because I want to make sure that people don't see Bobby as coming across as elite or differentiated that way.
I truly believe that whatever.
Product is both available affordable is the right formula for you, and your child will have the same chances as every other child out there, and I do I truly truly mean that.
Well, that's a relief, thank you.
I appreciate that your kids will be fabulous and they will have the same chances as everyone else.
I'm a fan. So, I mean, there's something really interesting here and I've been trying to think of the right way to talk about it. Well, there's a few things. One let's just say MABBY is way more expensive than most formulas. Right, It's like a fancy, high end formula. And you're saying, it's not like gonna make my kids smarter, happier or whatever. So so what's the pitch.
Yeah, yeah, it's it's a it's a great it's a great point to raise, and I'll like underscore again what I said. I believe parents need choices, not just choices when it comes to infra formula. I think across anything that people consume, there needs to be choices because you got preferences. Now, at the end of the day, milk is milk, but some parents, and I would be one of them, I want to make sure that the milk that I'm feeding them is preservative free.
Organa grass fed, conventional dairy is.
Still going to give you the nutrients your baby needs to grow and develop, but on a spectrum they are different. Now that's just using one example, and you can point to any industry where whether it's a fabric in the retail and clothing industry, or whether it's something within cosmetics where people choose to have something that is slightly richer in collagen than a moisturizer that doesn't at the end of the day, it is moisturizer and it's going to give you what you need.
Yeah, my kids are now at the age where they're super into skincare, and so I appreciate that point too, because you see the different care well, you see the difference in price for sure. Exactly in a minute, we'll talk more about marketing in the biggest sense of the word, and also about what happened to Bobby during last year's big formula shortage. Now back to the show, So let's talk about Like, marketing is really interesting to me here, right, So let's talk about marketing, because you know there's one when I first started thinking about this, I was like, oh, maybe it's just marketing. But then like I objected to that word just right, because I feel like marketing is a big deal, right, Like whatever we tell ourselves stories in order to live, you know, Joan didon and just when you will look at look at say Simolac. I think we gave our kids Simolac a can of Simolac, one of the big brands, and then a can of Bobby. Like they're telling such different stories, right, Like Similac came out in what the nineteen fifties, right, this era of like better living through chemistry was kind of the you know, the fremailing belief. And when you look at Simolac, it looks like it looks very much like a medical product. It actually says number one brand fed in hospitals on the can, and there's like these acronym for some thing that I don't know what it is. And then you look at the Bobby can, it's like a line drawing of a cow, right, And like the biggest letters are organic, right, And so it's like one is medicine, science and then other was like nature cows. Am I reading that?
Right?
I mean is that part of sort of what you're selling.
I like that you underscored that it's not just yeah.
I really think that, especially because this is formula and breastfeeding. It's for which itself. Like when you look at the amount of narrative around breastfeeding versus formula versus the amount of science, like it's so much narrative, it's so much marketing. The sort of breastfeeding versus formula story, and and that story makes people, especially women in my experience, moms feel so bad when they can't breastfeed, right, And I feel like the marketing piece, the storytelling piece of what you're doing fits with that, right.
It does. Look there's a huge universe out there.
You're like, ah, whatever, I mean, it's all bs. People shouldn't be guilty about it. But it's hard for that person to really judge if you haven't been in the other person's shoes. Yeah, and there is going to be many people who will hear this, and we've been on the journey with them where in their postpartum state and in that state of is this right for my child?
How am I feeling? Do I feel guilty?
You grow up dreaming of breastfeeding and then you realize that you can only put out two ounces. That's heartbreaking. This is not like, Oh I chose that granola bar over this one. This is a completely different moment in life. And again, my job is to make sure that we play such a radically centrist position. Unfortunately, the war of breastfeeding versus formula got to a place where it was pretty bad, and I think we all need to start realizing that it's not about what your child is fed, that we need to just all accept how they're being fed and just say, your baby's being fed and that's a good thing. And we have to And that's the whole goal that I have in our messaging, is that you just need to feel good that you are feeding your child something, to be proud of that, whatever it is for you. And by the way, some other parents who doesn't need that message might be totally fine and proud of whatever they've chosen to feed their child. And there should be no shame, no pointing fingers, and we need to accept that. And I am very, very proud to not look at our branding, our marketing as a sales tool, but rather as a culture changer. And again I know that there's going to be and there has been many people go ugh whatever, And yet until you are in someone's shoes who's truly going through that, do you really understand the importance of changing a narrative.
So we got to talk about last year's formula shortage right this moment. Last year, it was big national news when one of the big factories that makes formula in this country shut down, and suddenly there was not enough baby formula in America.
I mean, you couldn't write this story.
And every time I just hear these these moments back to back like we're doing today.
Oh, I get PTSD. Oh this all went down.
So what happened was that it was February seventeenth. I remember so clearly, sitting at my desk and I saw the news that this recall was happening for a large player. And because I have spent the last five to six years researching, understanding the industry and seeing what needs to change, I knew within sixty seconds of reading that that recall went down. I knew that this was going to cause a national shortage. And I remember turning to the team and I was like, here's what is going to mean. It means that for what period of time the rest of the players are going to have to feed America. Yeah, and within one week post that shortage, our customer count doubled. Now for a small players just entered to see your customer count double that quickly.
On one side, yes, I.
Think as a CEO, you're sitting there going, oh my god, this is great.
We're taking off right.
Well, if you are selling software. It would be your dream, right because you can sell as many licenses for the software as you want. You could sell a billion of them. You can just get more service space you give it in. But you're not selling software, right, You're selling a thing, and presumably you can't just keep doubling the amount of it that your manufacturer is making for you.
And we're also not just selling anything.
We're not selling a piece of furniture where if someone comes and it says we're sold out, they go, ooh, I.
Want that more. It's so cool.
We're selling an essential good that feeds babies, and that essential good it's not cool to be out of infant formula. It's not cool to be out of your baby's food. And that's where being a mom plays into this as well, because what it means to solve for these moments, you get a different level of empathy and relatability to what all American parents are going through. And my head of growth sharene an exceptional woman whose job is to grow the business, was the person who sat in front of me and said, Laura, we are growing too fast. And here's the problem. We are depleting inventory faster than our ability to keep up, and if we keep depleting product, we won't be able to continue and reliably serve those that have already made a commitment to us. And in hindsight, it was not a hard decision. Within twenty four hours of that, we made the decision to stop growing the company and to just give a promise to those who signed up for Bobby that we will continue and reliably be able to serve them.
So, even though we.
Kept making product, that product was for those who made a commitment to us already, and we were not about to grow too fast in a world that we had no control in and then run out one day.
So do you like just flip a switch so there's no sign, Like, do you turn off your website? Like, what do you actually do?
Practically? That's exactly what we did.
We you know, you go to your product page to go buy something, and we had a letter on the page that basically said, we have a customer promise that if you sign up for us, we sign up for you. And right now we are serving seventy thousand babies across this country and during the shortage we want to continue and reliably serve them, and right now we can't accept more customers. At the time, I thought, maybe this will go on for a month.
You just don't know what it was.
Seems like a long time. It was seven months.
Seven months, we turned our side off seven and it felt like a lifetime.
So you made it. You made it through that period, you turned your site back on. You're back to grow in the formula business. Now, what's the next thing you want to do?
I think as we continue to grow, we will be given the permission by our consumers to say, maybe we should start looking at other ways that we can tap into the.
World of nutrition.
So while I think we've started with the first one of the hardest, most regulated products, I'm excited for the innovation that's happening right now to say, how else can we look at nutrition, especially in those first thousand days for a child, and also looking at nutrition for a mom. So I'm excited to see where Bobby takes our next steps to solve for a broader nutritional set.
We'll be back in a minute with the light Now back to the show. Okay, let's do the lightning round. It's just a bunch of semi random questions that I hope will be fun for you. You used to work at Airbnb. Give me one secret hack for renting a place on Airbnb.
I would filter for SuperHost good will. It will truly be.
That nine or ten that you're looking for, and you're not rolling the dice.
And to be clear, SuperHost they're identified on Airbnb. There are people who have hosted for a long time, gotten very good reviews.
Correct, they have a badge, they're dedicated, they're fantastic. And if you're not a super host and you're listening, go become a SuperHost.
I read that you used to be a day trader, and you know, I was an economics reporter for ten years, and if there's one thing I learned, it's don't be a day trader. Yeah, are you're wrong? I also read that you did well as a day trader. So were you lucky? Were you good?
What? Like?
Give me one thing on day trading?
Oh my god, I love that.
And the one advice I would have is don't day trade if you can't watch the market. And what I mean by that is I worked on Google Finance. I was staring at the I was staring at stocks all day. I was staring at the ups and downs. I was watching the news that related to the ups and downs, and essentially I was in it. And when I hear of people just jumping in and day training, but then they're like out of it for a few hours, it's dangerous And yeah I was.
I was in it.
You're Irish, gon do a couple of Ireland questions. Besides your family and friends? What do you miss most about Ireland?
Oh?
The banter, Well, the banter, the crack, my right to call it crack? What is crack?
What is crack?
I know? And I hope you never cut this one piece that says Laura misses the crack.
What I mean by that is that it is banter.
It's the fun, it's the levity, and it's the hospitality of Irish humans, even if they're strangers, you will always have fun.
Is Guinness overrated or underrated?
Oh?
Extremely underrated, stunning, It's nutritional and unfortunately you can't pour a good pint here in the US.
Guinness is like formula for grownups.
Again, you can't quote me on that, but maybe I'm winking you.
No, I definitely am going to Laura Mody is the founder and CEO of Bobby. Today's show was produced by Edith Russolo, edited by Sarah Nix and engineered by Amanda K.
Wong.
You can email us at problem at Pushkin dot fm, or you can find me on Twitter at Jacob Goldstein. I'm Jacob Goldstein and we'll be back next week with another episode of What's Your Problem MHM