Live from SXSW: George Milton and Erin Link - How They Founded Yellowbird Sauce

George Milton
Both of us ate a lot of Sriracha. I think we'd go through two or three bottles of, like, Sriracha a week. What kind of led you even to start a business? We did not have any intention of starting a business. Whoops.

Cause I was trying to imagine myself as a 50 year old bar musician. I had a hard time doing that. I didn't wanna do that. So I was like, I should be hot sauce entrepreneur instead. How did you all land Whole Foods?

Whole Foods called us. We see yellow bird is everywhere. We'd like to put it in Whole Foods. And it was like, you do. Hello, I'm your host, Mike Elp, and this is the consumer VC podcast brought to you by propeller Industries, the leading strategic finance and accounting partner for venture stage companies.

Aaron Link
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This was a live podcast from south by Southwest in Austin. Thank you so much for Michael Best and Mark Nathan for hosting us. It was a pleasure chatting with George Milton and Aaron Link. They are the founders of Yellow Bird Sauce, which is one of my favorite hot sauces. They have the serrano, habanero, jalapeno, Sriracha.

Mike Elp
Blue agave, Sriracha, and I think ghost. Peppers and I think a few others as well. They're in places like Whole Foods and also Walmart. It was pretty amazing hearing how they. Got into Whole Foods, how they also got into Walmart, and also how their.

Aaron Link
Approach to retail expansion was. George has been on the podcast. He was one actually the first guest. Thank you, George. Back in 2020 when I was first starting this thing.

Mike Elp
But this was so great doing this. Live with George, meeting him in person, also having Aaron on as well, and hearing about Aaron, how her approach to. Actually building the brand of yellow Bird and how her approach to kind of branding and positioning in for yellow bird two. So this was a fun one. Really great, really great time with them.

Highly recommend checking it out and well. I guess you are checking it out. So here they are, George and Aaron.

Thank you so much, Mark, for having us. Thank you so much, Michael Best, for producing this whole, whole, whole thing. And also funded house and Q branch. George and Aaron, so great to finally meet you both in person. This is awesome.

George Milton
Yeah, it's great to be here. Thanks for having us. Yeah, no, really appreciate it. How many of you all are CPG founders or in the consumer space? Oh, good.

Mike Elp
All right. Awesome, awesome, awesome. Well, I'm Mike. I founded this podcast called the Consumer VC podcast newsletter, interview, venture capitalists, and obviously incredible founders like George and Aaron. Huge fan of your sauces.

Our entire family is also big, big fans of your sauces. So this is gonna be a lot of fun. Thank you. Yeah. Well, let's like.

Well, let's start with. How did you both end. How'd you all. How'd you both meet each. Meet each other?

George Milton
We. Classic love story. We met at a bar in Houston. I was a dueling piano bar player for a long time, and Aaron was in there with a bunch of her friends. I love at first sight.

It was for one of us, it was. It took a little while. It took me about a year of convincing her to hang out with me. But, yeah, that was in Houston. We lived in Houston then, so.

Mike Elp
I know, George, you were always a hot sauce fan. You put hot sauce and everything. Was it same with you, Aaron. So I got introduced to hot sauce when I was in college, of course, eating the super cheap food and just drenching it in the very well known other sriracha. And that was kind of my first intro into super spicy food.

Got it, got it. And I imagine now you're still eating a lot more, or. Yeah, from there, I started working in a mexican restaurant called Hugo's in Houston. And obviously they have a lot of spicy food, being an authentic mexican restaurant, and ate a lot of habaneros there. Fell in love with fresh habaneros.

Erin Link
So, yeah, didn't ever look back. So that's awesome. So is that part of the reason why did you? Cause I know that the first sauce that you all started with was the habanero. Right.

Mike Elp
Why was it the habanero and not like a jalapeno or like a serrano? We were just making it for ourselves. We had. We did not have any intention of starting a business. Whoops.

George Milton
So we were just. We were just, both of us ate a lot of sriracha. I think we'd go through, like, two or three bottles of, like, sriracha. A week, and. Wow.

I know. I know, right? Yeah. Thank you. Thank you, whoever.

Clap for that. But it was. It got to the point where we were like, okay, we wanted something because that stuff is, like, it's, like, half sugar and preservatives, and, like. And it wasn't spicy enough at a certain point, so we wanted something that was, like, spicier and just made with food instead of, like, sugar and preservatives. So that's kind of how we started, was we were just making something for us, and it was.

There were, like, a million different versions of it, so we didn't have a business plan or anything that a VC fund or anybody would like. When we were making sauce, we were just making sauce. But to answer your question, a habanero is just a superior pepper. So, yeah, it's pretty great. So we had.

At one point, Aaron was growing. We moved to. We moved from Houston to Austin, and at one point, Aaron was like, we tilled up our backyard. Like, we rented, like, a commercial tiller and tilled up our little backyard and grew. How many pepper plants?

Erin Link
100 pepper plants. We had 100 habanero plants. I won't do that again. In our backyard, we had, like, rows. We have, like, just a regular ass backyard, and we had, like, rows of, like, of, like, peppers.

George Milton
Like, it looked like a tiny farm. And so that's what we made first, was the habanero sauce because we. Because we loved it. And then we actually started a business. I refused for, like, three years to make another product again.

Things that, like, investors would probably hate, but we didn't have any then, so. Well, I mean, you both were consuming so much of your own sauces. What kind of led you even to start a business in terms of, like, actually giving out? This? Was it giving out to friends?

Mike Elp
Friends started liking it, or, like, what was, like, the. It didn't take a lot. We had a lot of friend dinner parties, and one of his friends was like, you should bottle this and sell it. And he was like, yeah, I think everybody should. Everybody has a friend who says that about something that you make, right?

George Milton
So we didn't take it, like, too seriously, because it was just. People say that about. So, like, I was playing in bars when we first moved here. Like, I was a bar musician, and so, like, we would have little, like, versions of it. And I was like, I would just, like, take it around to people and be like, hey, try this.

And, like, it got to the point where people would come up to me, like, at a bar and be like, hey, man, hey, that was a good set and everything. And I was, like, trying to sell albums because I was a musician. I was like, man, I'm gonna make it. I'm in Austin. I'm gonna make it.

And they'd be like, no, dude. But I heard that you're, like, the hot sauce guy. You got some. So instead of, like, carrying albums in my bag, I would just carry, like, hot sauce in my bag. And after a while of doing that, I was like, should we?

Erin Link
He was the real Beyonce. I was like, after a while of doing that, I was like, should we. Should we, like, do. Cause I was trying to imagine myself as a, like, 50 year old bar musician, and I had a hard time. Like, I had a hard time doing that.

George Milton
I didn't. I didn't want to do that. So I was like, I should be a 50 year old, like, hot sauce entrepreneurs. So we started making it and, like, taking it to, like, well, the first. My first customer was a guy at one of the bars that I played at, and he opened up a corn dog stand on 6th street.

So, like, right down. Right down the road from here in front of Pete's and, like, buckshots and whatever. And so he, like, sold corn dogs, and it was just, like, unlabeled habanero sauce at a corndog stand. And then we were like, we need to put a label on. We should put some ingredients on this bottle.

Yeah. That's amazing. That's amazing. Well, I mean, since, of course, you were obviously, like, experimenting, figuring out what, like, the best flavor profile or what the best kind of, like, ingredients mix was. Right.

Mike Elp
Did you ever have, like, bad batches? Yeah, like, most of them. And so we got the. Well, so we have a fun. We have kind of a funny story about, like, there's a bunch of funny stories about early batches that we made that were pretty bad, but, like, I went through a phase where I would.

George Milton
I would, like, trying a bunch of different stuff, and I would just. I would just, like, go to a bunch of different, like, local restaurants in town and be like, what do you think about this? Does this suck? And the answer was yes, a lot of times. But, like, we were doing.

We were doing this thing. We were trying to do. We were doing, like, natural fermentation. Like, initially, like, you would do, like, a gochujang or something like that. And I was trying to figure out a different way to do fermentation.

And so I was using, like, different yeasts to ferment, like, pepper sauces, and I used a champagne yeast one. You remember the story. But, like, at one point, I was using champagne yeast to ferment peppers, and then I make it into hot sauce. And so what you're supposed to do is you use the yeast to, like, ferment the sauce, and then you do a cook to, like, kill the yeast to, like, stop it. But I had a particularly, like, virile, like, I don't know, it was just a very strong yeast.

And so I did a cook that was supposed to kill the yeast, and then I bottled it, and I took it around to some restaurants, and there was a chef at. Where was it? We took it to whippin. Whippin. Yeah.

Erin Link
And this was way. This is maybe like, 2015, 2014. This is a while ago. This was 2012. This was a long time ago.

George Milton
This was before we had a recipe. But, like, I took it there. I took it there, and the chef called me really mad. She thought I was trying to play a prank on her because she opened it and it exploded to the ceiling like champagne. Right?

Because it's. Yeah, champagne yeast. And so we had, like, that batch, and we took them in the backyard. We were like, I'm surely it can't be that bad. And we're, like, popping bottles in our backyard, and it was, like, 20ft.

It was like, I'm glad we didn't hurt anybody, but that was pretty bad. She took the sauce after that. She said, yeah, she did. Yeah. They were one of our first customers when we finally got it right.

Cause I think she just wanted to be like, okay, you got it. But. But we had a fun joke, but, yeah, so much. We had another. We had another one where, like, we were going, we would do the Austin Chronicle hot sauce festival.

So the very first year we did that, we entered as individuals. They used to have an individual category. I don't know if anybody here knows that. I don't know how many locals are, but, like, so they used to have the Austin hot sauce festival. They would have, like, a, like, an individual category and then a commercial category.

And so we entered the individual category, and they had this tasting tent, and it was like 220 something different sauces, and they put them in, like, just like, the same containers and with just numbers on them. And so people weren't. Were unbiased, and the people, yeah, it was like, blind taste test, and people would try them. And so I went down the line and I found the one that I had made. And so I just kind of camped out, and I was like, this is early, early market research.

But, like, I just camped out and I was like, watching people. I was like, it's 47, and I was just watching 47 to see what people think. And, like, we had, like, people actually, like, spit it on the ground. It was, it was just like, so, yes, to answer your question, in a very long way. Yeah, we had some pretty bad versions.

I think that was the question. Yeah. Well, I guess what point then, did you feel like you had maybe like an acceptable or decent, you know, version of it to finally, I know that you all went through, like, farmers markets and got in there, but, like, where it actually makes sense to actually commercialize it. Well, you remember our first, it was all me. He was making all of these funky batches that were just kind of, eh, they're all right.

Erin Link
And he had to go out of town for a gig and he was like, I'm just going to throw all of the stuff that we have into a pot, see what happens, blend it up, put it in the fridge, and then he's out of town. And so I'm home eating this. I'm like, this is really good. What is this? And I keep eating it.

It's so good. Super spicy, super creamy. Just everything about it was perfect. When he got home, I was like, this is the sauce. I was like, what did you do?

And he said, I have no idea. I have no recipe. So now I have to reverse engineer my own hot sauce recipe. But that was ultimately how we landed on the habanero hot sauce. It was accident.

George Milton
Wow. So what was that process then? Getting into farmers markets and kind of commercializing it and actually getting the product out there? I think it was kind of an ongoing. And anybody who's done any sort of business, there's kind of some hurdles that you have to jump over at every stage.

So, like, farmer's market, you have to make it in a commissary kitchen. You have to be inspected and all that sort of stuff, which for like, the hot sauce festival and the, like, local kind of people, the corn dog stand. Like, you didn't have to have any of that stuff. You didn't need an ingredient label or any of that stuff to sell unmarked hot sauce to a corndog stand. But once you get in, once you get in farmers markets, you've got to get your health certificate sourcing as well.

Mike Elp
Is that like, could you still, like, use your own peppers or do you have to also? So we were partner with farmers. Yeah, we were using our, we were using our own peppers and then getting stuff at, like, Costco or like, you know, like, working with, like, local so we'd go to, like, brothers produce or hardee's produce or something. Once we started getting a little more volume, then we could get at the grocery store or something. So, like, it was kind of a mix of local and then, like, local kind of wholesalers or distributors.

Erin Link
And we would oftentimes just buy that entire basket of habaneros at Fiesta or something, you know? But, yeah. So how did you land? I know, like, one of, like, the first big accounts you all got into is whole foods. How did you all land whole foods?

George Milton
Well, so in the early, early days, when we first did put a label on it, finally it had my cell phone number on it, which doesn't anymore, but we were selling it to a couple of local places in town. So, like, counter cafe and Gourmand's rest in peace. And at that point, it was already in Wheatsville. It was in Wheatsville, but we had it in a couple of, like, we literally had two wheatsvilles and then, like, three, like, two counter cafes and gourmands. And then whole foods, like, called us.

They used to have a local forager program, and so it's just somebody, because the whole Foods office is here. And they called my phone one day, and they were like, hey, we would like to put yellow bird. We see yellow bird is everywhere. We'd like to put it in whole foods. And I thought it was a joke.

I thought somebody was, like, playing a joke on me. But when they said they saw it everywhere, it was like, the Whole Foods global team or Southwest team or whatever would just go to the three restaurants that I sold yellow bird to. So that was like, I could not have done it. I didn't do it on purpose, but I could not have planned that better. They were just, like, cycling these three restaurants for lunch every day.

And so, according to them, I was everywhere. Like, yellow bird was in every restaurant that they ever went to. And so they were like, we just see it all over the place. And I was like, you do? And they said they were like, we want to put it in.

You know, we would like to put it in, like, the four whole foods in the Austin area. Can you do that? And I was like, that seems like a lot of volume. Let me see if I can figure it out. And so we had to get.

We figured out the commissary kitchen first. Cause I need. Cause I needed, like, more commissary kitchen time. And so I called him. I called him back.

Like, we were doing a bunch of shuffling to figure out, like, okay, well, how many cases do we think they're going to need every week? And so we got enough commissary kitchen time. We figured out where we're going to get all the ingredients, and I called them back and I was like, we're ready for those four stores. And they're like, we think it should be 40, though. And I was like, oh, okay.

Erin Link
At that point, we were maxing out at, like, a case a week maybe, I think. How much were in a case? Twelve bottles. Wow. So not a lot.

George Milton
Yeah, it wasn't a lot. Those were the 19 ounce bottles, so the big bottles, but still it was not very much sauce. So that's when we tried, that's when we tried out co packing for the first time, I think when we launched with Whole Foods. So we went and found, like, co manufacturer for our sauce for our whole Foods launch, and then we had to do a recall for our first batch because they were adding water to our product. It was a whole.

Man, we had a time. Now that I think about it, we really had a time. So when you actually then got to the co manufacturer, on the sourcing side is this one. You also were, like, one of farmers and also sourcing directly from farmers. The raw ingredients, the peppers, I imagine fruits as well, because those were the hot sauces, too, but.

Mike Elp
Or were you still kind of going for going to Costco and, like, going to, like, maybe like, different grocery stores to buy the ingredients? So we were doing a little bit. We were doing a little bit of everything. The, the dream for us at that time was to launch a, like, a fully organic hot sauce that was scalable. So we, we had already started talking to farmers to see if we could, like, contract organic peppers because they're getting, like, organic has never been in some categories.

George Milton
Organic is really big, but you don't see a lot of organic hot sauces or organic peppers because people don't really ask for them. Right. So, like, people will take a fully organic meal and put, like, tabasco on it or something, which is not organic. So we were trying, we were trying to, like, okay, we want a fully organic hot sauce. The hardest thing to source organic was the chilies.

And then you have, like, your garlic and onions, and then citrus is a little easier. Organic vinegar is pretty easy. Organic sugar, whatever. All that sort of stuff is pretty easy. And there's no sorts.

There's no such thing as organic salt. So just organic water. Yeah, if you didn't know that. No such thing as organic salt. It's a mineral, can't be organic.

But people ask us about that every week, like, why don't you guys use organic salt in your organic sauces? And we're like, well, let me tell you. But no, at that time, we were still kind of doing a mixture of whatever. Like, we. We would buy peppers from.

We buy peppers and carrots, and depending on the season, we'd like onions and stuff from Johnson's backyard garden. Again, rest in peace. That's. That's a local. It was a local, like, 200 acre farm that was just east of Austin, and we sourced more and more stuff from them.

We ended up, like, there was a little while where I was, like, working directly with family farms in, like, the Yucatan in Mexico. So that was kind of a. That was a wild time as well. We had a lot of. There's, like, a lot of wild times.

It was, like, going down to the Yucatan and, like, making these deals, and I do not speak very good Spanish either. So just going down there and, like, making deals with these, like, local family farms, and then, like, shaking hands with them and being like, oh, man, do we think that that stuff is going to show up that anyway? Did it sometimes, and sometimes it didn't. So that's. But we were kind of doing whatever we have at this point.

We have a pretty steady supply chain, but that's kind of a result of doing everything and. Yeah, everything ourselves and kind of seeing what stuck. And by the time we saw what stuck, we had, like, we had, like, redundant supply chain. And then when. When, like, Hui fong is, like, out of peppers because they have one supplier and it didn't work out, we're, like, you know, a 10th of their size, and we have ten suppliers, so we're all good.

But that was kind of by accident. We kind of backed into that. Well, I was gonna say. So it seems like that the first time that you work with a comeian, with, when you got into whole foods, sounds like it wasn't a great relationship or didn't get off to a good start. You talked a little bit about, like, they're like.

Mike Elp
Because I know that you now, like, have your own manufacturing facility and everything, as you say, like, you are much more vertically integrated. Talk to me about why that kind of didn't work out with actually having someone having a command rather than doing it all yourselves. Yeah, I mean, having a co manufacturer, it can be a blessing and a curse, obviously. Anybody familiar with co manufacturing? Okay, cool.

George Milton
All right. How many of you love your co man? How many of you are a co man? I mean, it can be a blessing and a curse. Because if you're going to scale something, it is probably the least capital intensive way to scale a product up.

You don't have to open a facility and have HR and deal with OSHA and organic certifications and audits and all that stuff. You just go do, like sales, marketing, and customer support and all that sort of stuff. So for us, the big thing was that we were, when we did finally put together a business plan, we were like, the only way this works is if we can scale up the farmers market. Quality. Like, the product has to still be this good.

When we're making a thousand or 10,000 or a million of them, it has to still be this good. So we went to a, we went to a co manufacturer and we were like, fresh carrots, fresh peppers, go. And they're like, no. Yeah, because that's hard and it's expensive and it's, you know, because we do all of that stuff now ourselves. Like, we have our own, you know, like a 30,000 square foot manufacturer, like, hot sauce factory now.

I know, pretty cool, right? And that is very hard. It's really, I mean, it's every day to bring in fresh stuff. And then we're always going through, we are always going through the process map and being like, where can we be more efficient? Because on the consumer side, the customer, especially right now, is very sensitive to the price.

Walmart is one of our biggest customers. We do business with Costco, so people are sensitive to what the price is. So, like, carrots are. Carrots is our number one ingredient. Like, that's by volume the largest ingredient that we use.

There's a lot of fibers and carrots. When I was first doing it myself, it would take me 10 hours to, like, stew the carrots to where you could turn them into a sauce and not have it be all pulpy. So, like, doing the process map for that at scale is tough. It's very tough. And so I don't necessarily, I mean, it was very hard going to a co manufacturer and saying, this is what we have to do.

And they're sitting there trying to figure out how to make some pennies off of a bottle. I mean, that's a hard business to be in as well. And it's like, they look at it and they're like, we can't stew carrots for 8 hours or 10 hours or whatever. So what about if we use, like a carrot flavoring or a carrot powder or something like that? Or we're gonna add water, because that makes the process go faster.

So it was not what we wanted to scale up, ultimately. Yeah. So you were kind of forced to make some, like, concessions probably also because, you know, still, you're. You're. You're still, like, a small brand at that point, right?

Mike Elp
Like, you just got into 40 stores and old foods, which is incredible, but it's still, like, not you. You still, like, weren't as if you weren't at scale. You probably weren't even, like, a priority probably for, like, the co man either. Yeah. Yeah.

George Milton
I don't think we were a priority for anybody. Well, I mean, like, so it seems like. But it seems like since obviously you're in Whole Foods, you're obviously in Walmart, you're in Costco. Seems like you were still able, even. Though it was like, a bad batch or wasn't, the flavor wasn't quite right, you were still able to sell through in Whole foods and kind of.

Mike Elp
And people clearly kept buying. It was that difficult because you felt like the quality wasn't there? Well, we didn't sell the stuff. That was not good. Yeah, we took all of that stuff back and then I made it.

George Milton
I made the replacement. You made all of it? Yeah, because we fired them, but we didn't have any place else to go, so I actually had a commissary kitchen. It was like, what, 1200 square feet? Yeah, it was tiny.

So I had, like, signed a lease on this little. It used to be a catering kitchen or something in round Rock, and it was like, 1200 square feet. It had a little office and a little cooler. And so I just, I was just in there. And so when we were in the co packer, like, we still had that space.

I was, like, subletting it out to a couple of other. There was a chocolate company in there, and there was another guy making hot sauce in there, too. And so when, when I had to pull all that stuff back from Whole foods, I just. I just. I don't know.

I don't know how many hours I was in that kitchen, but it was like, it was like, just a solid, like two weeks of just, like, remaking everything and just, like, bottling it myself for, like, 40 whole foods. This episode is brought to you by Propeller industries. If you run a high growth business and you're focused on profitability, extending your Runway and improving your operational efficiency, you probably need a finance and accounting wiz that will grow with you. Well, instead of hiring someone full time, what would be cost effective is working with Propeller industries. Propeller Industries is a leading strategic finance and accounting partner for venture stage companies and has partnered with over 1000 startups and high growth businesses across consumer products, consumer tech and enterprise.

Aaron Link
Some of the brands that they've worked with are liquid death, Alipop, Himss, farmer's dog away, movie pass and Giphy. Propeller also provides specialized support for fundraising and m and a with transaction advisory services. Propellers TA team of former investment bankers and investors can step in on more of a project basis when pursuing full scale financing and m and a there's a link to Propeller industries in the. Show notes if you want to learn more information. Was whole Foods pretty understanding that they, they had to go back and kind of redo everything?

George Milton
I mean, we're, we got to stay in Whole Foods. So to the extent that they. Yeah, to the extent that they didn't immediately kick us out, yeah, they were understanding. And Whole Foods has always been a really good, I don't know what it's like now to start as a small brand in Whole Foods, but for the time that we were growing, they were very, very good at being a large company that dealt with really small companies. And so they were like, yeah, I mean, basically, like, you get one, but like, get it right because this is not the product that we bought for our stores.

Yeah. And I mean, they did give us like another good chance. You know, they realized that we had product issues and we're like, yeah, we do have product issues that we need to fix. And so they said, fix it and we'll put you back on the shelf. Got it.

Mike Elp
And then after those 40 stores, like, what was like the next kind of growth opportunity that you all were, like, thinking about? Seriously? I mean, obviously it first was, let's get our manufacturing, you know. Know, kind of. Right.

Was that, was that at that point, you both thought, we need to open like our own facility. Maybe we need to raise money in order to raise our own facility. Or like, how did you think about solving manufacturing issues you were experiencing at scale? So we actually found in 2015.

George Milton
Oh, boy. So in 2014, we launched with Whole Foods and we moved all our packaging to glass bottles. At that point, there was kind of like, in the natural industry, there was a lot of, we initially launched our product. I don't know how many people are familiar with our product, but it's squeeze bottle hot sauce. As we initially launched in like squeeze bottles with hot sauce.

It was Sriracha but better and Austin. And so the squeeze bottle was like a big part of the product. And we went into Whole Foods, there was a lot of clamor kind of around packaging in the natural space about the, you know, that plastic is not as reusable that. I mean, we all know, like, plastic. We know.

We know. I don't have to tell you about plastic, but people were not a fan of it. And so when we launched in Whole Foods, and it was also easier for co packers to deal with to hot fill in glass, right? So, like, when we launched in Whole Foods, we launched in glass packaging, and all of the same people who demanded the glass packaging did not buy it because it was not as good of a product. They wanted to squeeze it.

Erin Link
They can't squeeze that glass. So we ended up switching back to plastic bottles in 2015. We ended up finding. We did find a pretty good co packer who. Who actually, like, worked through the process with us, and they were doing a pretty good job for a while.

George Milton
And then they. Anyway, I'll talk a little bit of shit about them. Why not? They're not here. But they kind of wanted to make it.

They kind of wanted to make it. They got to the point where they wanted to make it cheaper and easier, and they eventually kicked us out. They fired us, and I had to show up with a moving truck and get all my stuff out. It was very. It was a very fun day.

But basically, at that point, they fired us, and we got them to do one last production run at triple the price. They agreed to do it at triple the price, and we had enough inventory for three months. So we're out here at this point, we've got three regions of Whole Foods. So that was our next growth, was we were expansion just with Whole Foods because we kind of, like, figured out how to talk to the Whole Foods customer and do that stuff. But so we had three regions of Whole Foods, probably about 150 stores total, when you included all of our local stuff here.

Plus, we were doing online business. I don't want to skip over that, because Aaron, meanwhile, had built this amazing brand and built our website and built the social media, and she did that by herself. Right. While I'm making sauce and dealing with. I was like, ecom, baby.

Erin Link
Let's go. Yeah. Before e.com was a thing, it was back before e.com was a thing, you understand? So we're out in the cold with three months of inventory. And so we were kind of.

George Milton
At that point, this was. When was this? This was, like, July of 2016. We got kicked out, and we got three months of inventory. And so we started looking for a place.

We had started. We had started a fundraise because we were, like, looking at slotting fees and looking at growing the brand. So we had started a fundraiser already, like a seed round, and that basically turned into, like, we need to open our own place because if we're going to scale it, it's only worth scaling if you've got, I mean, you guys know the four p's of marketing, right? The first one is product. So, like, we were like, we have to have a great product if we're going to go up against, like, it's a huge.

I mean, our set. Hot sauce is a huge category there. Everybody's cousin has a hot sauce, right. That they're like, oh, we could sell this. I get three or four emails or calls a week.

How, hey, my brother has a hot sauce. How does he start a hot sauce company? With a buddy of mine here in town, we made an online course for free. A free course called how to start a hot sauce company so that I could deflect people to that when they say so. It's a very crowded category.

So if you're, like, gonna go up against the huge incumbents and go up against all. Everybody's cousin and brother and uncle who's got a hot sauce recipe, we were like, we want to only scale the best recipe, the best product. So that's what that raise turned into was. We were, like, just frantically looking for a place that we could within three months, get certifiable somehow. So.

Mike Elp
So then you actually had enough. Had enough money to actually start your own manufacturing facility and actually own much more of your supply chain? We did. It was. I mean, it was by.

George Milton
It was literally by the skin of our teeth. Not literally. That's. Doesn't make any sense. But it was by the skin of our teeth, by the skin of our figurative.

By the figurative skin of our teeth that we got it in time. But yeah, that's when we opened, like, manufacturing at a small scale. Where are you finding, like, I'm just on the podcast. I've had quite a few investors on it seems like in the CPG world, it's maybe sometimes there's like a divide for those that actually want brands, actually have capex and actually have the competitive advantage of being vertically integrated versus, hey, we actually want to be asset light and use commands. Were you finding that it was actually a hard pitch to do or to say the fact that you actually wanted to own your manufacturing facility or not as much.

It became for the group that did our seed round, it was not a hard pitch because they loved the product and they were like, why wouldn't you scale this amazing product? Do whatever you have to do. Right? Like, those are seed round people. Those are your people in the seed round, right.

If you don't find your people in the seed round, you are screwed. So, like, it did become harder because we did a couple of rounds after that, and it did become harder talking to people and saying, we own our manufacturing, and we want to keep owning our manufacturing because there are a lot of funds that. I mean, every fund is a little different. Every investor, angel investor, everybody's a little different. And so, like, that's kind of one of those that you have up front.

That's the, like, hey, if you don't want to do this, then let's not go to all the. Right. We don't have to go through the six weeks of diligence or whatever if you don't want to do this. And I learned that pretty fast, so I could, like, save us some time. When I had the initial conversation, hey, we do our own manufacturing, and we're going to keep doing it.

Okay, well, our fund doesn't really. Would you be interested in not doing that so that we can talk? I'm like, no, we. That's what we do. Right.

But, like, after COVID, that became a huge benefit. Like, it turned for a while. It was a liability when I talked to people, and then it was like. And then every fund that I talked to after, oh, I don't know, April of 2020 was like, we love brands that do their own manufacturing. I was like, really?

Because I talked to you nine months ago, and you only worked with brands that do co packing. Wow, that's really, really interesting. Aaron, how did you. Also, because I know that everything that's kind of in the bottle is kind of George's domain, and everything kind of out of the bottle is your domain. What was your approach to the overall brand of yellow Bird?

Mike Elp
And also, how did you all decide on yellow bird just as a name, too? I can't take all credit for that. He actually came up with a name first, and at that point, you know, it was still very new. We didn't have a label. We didn't have any kind of graphics, any imagery at all.

Erin Link
He just had this idea for the name yellow Bird, and I said, why? And he said, I don't know. I'm like, that's not good enough. I need a story. Give me a good story to tell.

So my background is in branding and design, and so I really wanted a good story before I did any work on it. At this point, I was also working a full time job so he went and did some research and found out that there is this little yellow bird that lives in the Thai chili gardens and eats the chili peppers that flavors its body. So mammals don't eat it, right, because mammals don't like spicy food, most of them. So after that, I said, cool. That's a great story.

Let's make this into a brand. We talked about it for probably weeks until we finally said, okay, we want to make it this really fun, approachable thing. That's not the typical thing that you see on the shelf. That is the skulls and crossbones and death hot sauce. We wanted it to be fun.

He had this idea of, like, sort of tweety bird approachable. And obviously, I was like, well, we're in Austin. Let's make it, like, cool Austin. So I'm not saying that I'm the absolute best at branding, but I came up with something fairly quickly, and we're like, let's go with it. So if I showed the, you, original version of the yellow bird logo, now would look totally different.

George Milton
Let's get it up on the screen. Do we have that slide? But at the same time, it's very cool. Kind of tattoo Austin style. And once we realized, okay, we have to trademark this, I had to clean it up, had to make it actually trademarkable.

Erin Link
And then we went with that, and we stuck with it. And people kind of. Some people loved it. Some people were unsure of it. They're like, what is this little sunshine corn thing?

I have no idea what this is. Some people are like, I love this angry bird. So we had a lot of mixed reviews about the thing, but people loved the sauce. So at the end of the day, it was like, this is weird. This is different.

Let's pick this. And then they fell in love with the sauce. But, yeah, it was a process that took a while. No, that's. That's really interesting.

Mike Elp
Kind of just counterpunching what all the other obviously, like, hot sauce brands are kind of known for doing. How do you think about e comm? Because when it comes to, I know we were talking about this a little bit earlier, but, like, CPG and ecom, it's tough, right? Because ultimately, they're not huge. You're not playing.

It's not a huge amount of money you're actually paying. And ecommerce really only works. Um, I think if it's actually, like, the, the, your aov is pretty high just because they're shipping a lot of kind of costs incurred, uh, from, like, that standpoint, what was how did you think about what. What you wanted to accomplish on e comm? Cause I'd imagine, like, driving people to and, like, into the store is maybe even more valuable than actually making the purchase online.

But how'd you all think about it? I think I made our website in 2014, maybe. And at that point, it just had a paypal button. That was it. And it was just our habanero sauce.

Erin Link
So there's only one way you could buy it. And that was mainly just, like, for people that weren't in Austin, that couldn't go to Wheatsville, that couldn't go to the whole Foods here, that wanted to try it. So I think our first out of state sale was to New York, maybe it was 2013, just with that, like, silly little PayPal button. And then eventually we moved to WordPress, woocommerce. So really, the website was just to give people that weren't in Texas local the option to try it and buy it.

But, yeah, it was just a kind of a sampling thing. But people were paying for the shipping, they were paying for the product. They were paying for everything. So it worked. There was no advertising we were doing, aside from the Instagram post that we had, you know.

George Milton
Yeah, you said aov. That's, like, a lot more sophisticated than the ecom that we did, which was just that we had it. I was fulfilling it out of our garage, you know? Yeah. Yeah.

Mike Elp
It's amazing. That's amazing. Well, I mean. Well, okay, so you went into Whole Foods on the distribution side. You started off in 40 stores.

You expanded to three different territories.

One of the things that I think is really fascinating about yellow bird and what's really hard to do, first of all, I mean, obviously, it's really hard to get into Whole Foods, but going from natural channel to, like, conventional grocery is really difficult. I know. Like Kroger, that's, like, a huge account for you all. Walmart's a huge account for you all. Costco.

Aaron Link
How did you. How were you able to kind of make that switch? And how did you. How did you also think about your pricing as well when it comes to going. Going into conventional?

George Milton
So it's not an easy switch to make, but anybody who's got, anybody who's trying to make a business out of it is thinking about going to conventional, because natural is, like, 2% of the market. It's not a lot. So we started thinking about it years ago. I mean, the. The original kind of value proposition was that we wanted to be able to make a best in class product and have it be an affordable price.

Right. We were, we were never going to be, like, when we went into Whole Foods, we said, you know, we said that our retail price was going to be $7.99 on the shelf, and they were like, you can't do that. The most expensive hot sauce that we carry and will ever carry is 350 or so, 349. At the same time. That was half the size or less than half the size of our bottle.

Right? Yeah. But, like, it, from a unit cost standpoint, they didn't want it to be that expensive. And we kind of convinced them to give it a try and see if, like, let the, let their customer decide, and they did. So now that's the average retail in Whole Foods for hot sauce is $7.99.

And a lot of stuff has changed since then. They have a few that are cheaper, but, like, you know, there's, you can go to Whole Foods and get a bottle of hot sauce for 20 or $30. And so it was just, they didn't, they didn't know that people were willing to pay a little more in that category. That being said, like, we wanted it to be a value for what you were getting always. So, like, we first, our first big, I guess, conventional account, we wanted to.

We wanted to H E B and Walmart at the same time in 2018, which was probably a mistake and probably a little too early to go into Walmart, to be quite honest, because we got, you know, like, Walmart can do. We were selling Walmart the same stuff that we were selling to whole foods, and Walmart can just do a lot more to come down on price. So we would. We sold it at the same price, and Walmart was, like, 25% cheaper. And so we got a bunch of.

We got a bunch of kind of. I don't know, we're not to go back to an earlier thing. We're not anybody's first priority, really. But people were like, hey, we're price matching, and looks like Walmart has it cheaper. We need to get it cheaper, too.

And we were like, oh, no, what have we done? Right? But that was kind of our, that was our foray into conventional, was with h e b. But they would price match Walmart to the point that they were losing money. Like, that's how intense the price wars are.

Mike Elp
Wow. Yeah. So we kind of learned a lot. We learned a lot about pricing, kind of by accident. Cause we had stuff that was like, you know, at Whole Foods at one price, at Walmart another price, and we kind of could look at velocities and like, it's on Amazon for a different price.

George Milton
So, yeah, I mean, I think it's. It's ongoing. Like, what did you nail the price for? For us? So we ended up making a form factor that was exclusive to Walmart so that we could hit a unit price that works in Walmart.

Mike Elp
And was that just less. Less product? Yes. Okay. Yeah.

George Milton
Cool. Got it. Spoiler.

Mike Elp
In order for the product actually work in Walmart. That makes sense. That makes sense. I know we're running out of time here. One thing I really wanted to cover, and I was, I was telling, I think, george, this earlier, but I was in Whole Foods, saw yellow bird and just saw the rebranding or the repackaging of it.

I was like, whoa, what is this? Because it was like the old packaging was there and also the new packaging. How did that come about? I think the new packaging looks great, by the way. So you're saying it worked?

It worked, yeah, it worked. That was to address several issues that we had with our old packaging. The number one issue being that people didn't even know the name because it was too blurry with all the other stuff that was going on. So, I mean, we just had a TikToker kind of shout us out, like, kind of didn't like the rebranding, but she was, like, mad at the fact she couldn't recognize it. But she was like, I didn't even know the name until I saw the rebrand.

Erin Link
And so now I know it's called yellow bird, but also, how dare you rebrand. So it's kind of funny to hear that back and forth. We did it because we had retailers that were actively saying, hey, you're missing the heat scale on here. You're missing some flavor components on here. So in order to get into our store, we need to see those on your packaging.

And they're right. That's going to help consumers make a better educated decision to purchase. So it was that, along with new certifications that we gathered, updating our ingredient list, just so many things that compiled to, you know, facilitate this whole need to do the refresh at all. If we're going to make one change, why not make all of these changes at once? Because it's going to cost a lot of money to make a plate change for, you know, just one tiny thing.

Why not do it all at once? So we had a lot of things all at once with that and then also made our brand more iconic at the same time. Yeah, I mean, I definitely. My biggest thing when I first saw it, I'm like, oh, wow. Yellow bird is much more pronounced in terms of.

Mike Elp
And also the bird too. There wasn't nearly as much white space behind it, so I really like it. And of course, you also redid the website as well from that. I think we're actually almost out of time. Does anyone have any questions for George and Aaron?

George Milton
Go for it.

You gotta walk all the way to the back of the room to ask your question. Sorry. Okay, well, yeah, the hot sauce is great. Thank you very much for making it. I got two questions.

One's more of a serious one. Where are you guys looking to invest in commercial agriculture? To be able to hone a certain species of pepper for your lines? And then the second one is, have you ever gone to the southwest and got peppers from hatch, New Mexico yet and tried it out? So the answer to the first one is not really.

George Milton
I mean, we've got, we like, we would love for there to be a yellow bird pepper, but we kind of love one of the things that we try to celebrate, and this is, it helps us with supply chain as well, but we try to celebrate the fact that, like, we can get habaneros from a bunch of different places. We like that and we like that. I understand that if we owned our own, if we had the DNA for it and we had this, like that, it would be, this is yellow bird. Right? And a lot of people don't like the sriracha, like the Huifang sriracha, now that they've got different peppers.

The pepper was like part of the product, but we're not actively working on it. It would be super cool. It would be super cool. I would say thumbs up to that. Okay, cool.

Sweet. Sweet. That's awesome. Yes. But I'm the brand side.

Well, it seems like you guys are also kind of like pepper vittners at that point. If you're not just depending on one pepper, you can take blends from different regions and tourors and be able to make it into that sauce. Yeah, we've always enjoyed, like, the flexibility that gives. And we have it on our bottle that, like, heat and color can vary by batch because we're using. You know, like when somebody's like, why is this sauce?

George Milton
Why is this batch is like, hotter or less spicy than the other one? It's like, well, you go to the store, like, this is my story. I don't know if it's great, but you go to the store and you get an apple, it doesn't taste the same as every apple you've ever bought. At the store. And that's okay, right?

Or is it? I hope it's okay. The question about hatch chilies. I love hatch chilies. We've done.

We have made some sauces. I made a hatch sriracha at one point. Hatch ratcha or sri hacha. You decide. You decide.

I can't do that. Okay. All right. But we've never offered them for sale. We've never, like, done a big thing with them.

Well, I'm from New Mexico, so the sooner you do it. All right, we have one customer.

Thanks so much for sharing your story. Really, really excited. I've bought your sauce before in Whole Foods, and I live in New York, so maybe I was that I wasn't, but would have loved to have been that first customer in New York on e.com. But I'm curious. I found in my work with CPG brands that they struggle to learn about different customer segments from different retailers.

Like a Walmart chopper is not necessarily the same. They may not buy from your brand the same way that somebody in Whole Foods might. Or wait, what? Oh, I mean, at least what I've found in other categories. I'm just kidding.

George Milton
I was just making this joke. But I'm curious, how do you guys go about learning about your customer segments and discovering the data and the insights you need to be thinking about? Hey, should we launch new flavor variants or should we. We think about different retail partners or just different partnerships to help expand what we're doing? Just out of curiosity.

Erin Link
I mean, as simple as it sounds, we just talk with them. You know, anytime we have the opportunity to call them, to talk with them in person, to be at the retail store or at an event with them, it's just about hearing their story and hearing their journey with yellow Bird and finding out where they go to learn more about, you know, flavor and spice and just really getting to know them as an individual, which I think people should do anyway. So, yeah, we do kind of prioritize, like, doing those small brand things. Like, we're trying to do all of the small brand things that are good and all of the big brand things that are good and match them together to make a really good brand. And I think what Aaron said is awesome is we do that a lot.

George Milton
And she's been working with our CX lead to actively call and schedule customer interviews.

We do also think about segments. So we've done the segmentation work and we have done some market research as well. But, yeah, I think probably the most important thing that we do is be involved with actual human beings, because those are our customers. Thank you. Hey, guys, thank you for having this discussion today.

Mike, thanks for moderating. My question is around kind of in those early days when you were building a cool Austin brand and trying to introduce it to customers, what was the best way to kind of increase velocities at retail and start to show these retailers that you had a great product and kind of introducing it to customers? Because, you know, there's a lot of great brands that come and go. They just don't get in front of customers the right way and kind of build that loyalty. So was it, was it demos?

Was it great branding? What kind of. Was that big unlock for you? Yeah, I think that that's kind of the same response, too, is getting out in the field and being next to customers. We did all of our demos for four years.

George Milton
It was a lot. We did a full demo tour of the south. We did a demo tour of. Yeah, like, we had the southwest region, Midwest, which is mostly Chicago, and then, I guess, Colorado and that Rocky Mountain region. And we did, like, me and Aaron went and did all of the demos.

And so demos are really important in natural, more so than, like, at Walmart or H E b or something where people want to think about the product and hear about the ingredients, and they care about the, like, if I go do a demo at Walmart or at HCB, nobody asks us about, like, the farmer story or, like, how did you guys start? Or whatever, they're just like, do you guys have a coupon? Or, like, why is it so expensive? It's a different set of questions that you have. So, like, it depends on where you are.

But, like, when we were trying to build that in Whole foods, a lot of it was about. Was about getting to know the customers at the store and doing demos so people could, like, hear about it and know about it and just doing it over and over again. And also, like, getting to know the people at the stores, because a lot of people who work in natural grocery or a lot of people who work in a store, like, whole foods, do it because they love food, right? They didn't just accidentally end up there like you. There's a lot of jobs, I'm not going to name companies, but a lot of jobs where you might just end up there because you need a job.

People at Whole foods very rarely end up there because they need a job. They end up there because they're proud of. They like, that sort of thing. And so we gave away a lot of t shirts, a lot of stickers and pens and things like that. And we actually saw that being like, we would ask people about, like, oh, how did you hear about us?

Well, I was at the store and this guy Chris, who I always talk to when I go in, would, you know, told me that this was. I had to try it. And we would be like the staff pick or whatever. So, like, getting to know the people in the retailers, like, because those people can be your best unpaid. I mean, they're getting paid at Whole Foods, I hope, but your best, like, advocates that are kind of, like always on, like thinking about what is the stuff I can do that's always on.

And that was it at Whole Foods. Awesome. Thank you. Yeah, no problem. The question I always ask, usually the end of the podcast.

I know. George. Stephen on so this is for Aaron. What's one book that inspired you personally and one book that's inspired you professionally if you're a reader? Oh, inspired me personally.

I know these answers for you. I know your answers. Do you? Yes, I totally do. I feel like this is like a couple thing now, so just.

Erin Link
Should I ask, should I get to. Can I. Yes, sir. Sure. What's my personal.

What's my personal book? One Q 84. I was gonna say. I was gonna say 1984, but not that one. Yeah, that's a good book.

Professionally, I feel like there's so many good books that I love. I mean, essentialism is one.

The long and the short of it. How brands grow, they're just all amazing for branding. Essentialism is great for business. Yeah. Awesome, awesome.

Mike Elp
Yeah, no, essentialism comes up multiple times on the show. Multiple times. Well, thank you both so much. It's been a lot of fun. Thanks for having us.

George Milton
Thank you, guys. Thank you.

Mike Elp
Thanks again, Mark. And there you have it. I hope you all enjoyed it. It was so much fun to do. So great to travel down to Austin.

And hang out with everyone there. And if you're really, really enjoying the show, I highly recommend going to theconsumervc.com. Click and subscribe the newsletter and you'll receive all the latest fundraising nudes in. The world of consumer. And also when a new episode drops.

Aaron Link
Thanks for listening.

It.

Live from SXSW: George Milton and Erin Link - How They Founded Yellowbird Sauce

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1: The Beginning

2: Scaling Up

3: Challenges in Manufacturing

4: Brand and Marketing

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