Turning down $500k from Mark Cuban
From Tanking the Sharks’ deal to $2M in revenue: the juicy story of Genius Juice
Would you turn down a $500,000 offer from Mark Cuban and Barbara Corcoran?
That's exactly what Genius Juice did, and it turned out to be the best decision for their business. The all-organic smoothie company, founded by Alex Bayer, went from selling smoothies at local events to being distributed in over 2,000 stores across the US in just a few years.
In this episode, we'll take a closer look at how Alex and his team built Genius Juice from the ground up, the impact of being featured on Shark Tank, and their approach to achieving profitability and scalability. Alex also shares insights on how branding, packaging, and SKU rationalization contributed to their success.
Start small and iterate
Alex was inspired to create Genius Juice due to a lack of truly authentic and filling smoothies in the market. Due to the lack of alternatives, he decided to take matters into his own hands and develop a creamy, thick smoothie that would provide the energy and boost he needed while on the go.
That's when he discovered the (genius!) combination of coconut water and coconut meat. As he puts it, "Why leave out half the coconut when you can blend the entire coconut together?" By blending the whole fruit, Alex developed a first-of-its-kind smoothie with unique nutritional qualities.
Alex deeply enjoyed his smoothie and felt like he had stumbled upon something special. However, further market validation was necessary to justify investing heavily into it. Indeed, one of the most costly mistakes for entrepreneurs is to focus on secondary aspects, such as branding, packaging, and distribution, before validating their idea. These things are all meaningless if people do not like the product itself.
That’s why Alex took a lean approach and validated his idea by selling smoothies to anyone and everyone at local events, even without any labels or branding. They even sold smoothies to other units in the condo complex where Alex lived!
After all the hustling, the response was clear: people LOVED Genius Juice.
In late 2014, they finally had a big opportunity to present their concept to their local Whole Foods buyers, who fell in love with the concept and how unique and healthy the product was.
In the first six months of getting the product onto the shelves, sales were so tremendous (despite the high price!) that the Whole Foods team started to distribute the product throughout the entire region. Alex recalls, "People were buying it organically without us having to heavily promote it. It naturally took off in stores, which told me that we had something really, really special.”
The 10-3-1 rule
Shown above is the evolution of Genius Juice's branding over time, from their original line in 2014 to their current packaging. The company's continuous iteration on the brand is no coincidence.
Of course, a product has to taste good because that's what gets people coming back (and repeat buyers are key to scaling a brand!). As Alex says, "No amount of money can force someone to buy a product again if it doesn't meet their expectations."
At the same time, good branding is crucial to "get someone to buy the product for the first time." If no one notices you even exist, how can they know that your product is amazing? He explains that "packaging has to be eye-catching, where someone can notice your brand on a shelf with different products." And how could you not notice the Genius head with crazy hair!?
He calls it the 10-3-1 rule: "From ten feet away, you see the product, from three feet away, it's in your hands, and from zero feet away, it's in your mouth."
Turning down $500k on Shark Tank
As the saying goes, "Luck is what happens when preparation meets opportunity." For Genius Juice, that opportunity was being featured on Shark Tank. In January 2020, they were nationally aired on ABC and received an offer from Mark Cuban and Barbara Corcoran.
Although they ultimately decided not to accept the offer (opting instead to raise funds from their community on Wefunder), that exposure was a pivotal moment for the company. They generated $120k in sales in under 24 hours and tripled their year-over-year revenue. That's a tremendous result! If you're a CPG founder, you should definitely give it a try and apply to the show!
Genius Juice’s community round
A couple of months after turning down the Sharks' offer, Alex raised almost the same amount from nearly 1,000 of Genius Juice’s fans and customers. Alex emphasizes that this provided value not only in strengthening the relationship with their customers, but also in acquiring new users who discovered Genius Juice via Wefunder.
Alex explains, "Not only did we raise capital from a community of people who believe in us and want to support our growth, but these investors also started purchasing our product." According to Alex, this is the biggest added bonus of doing a community round, especially for DTC brands. As he puts it, "It is monumentally beneficial to have investors who can buy your product.”
Focusing on profitability
If you are a founder fundraising in the current economic environment, you certainly know that it can be challenging. According to Alex, “It is really important to treat that money like gold and be careful with it. The CPG industry has undergone a significant shift, and the idea of growing at all costs to increase top-line revenue is no longer viable.”
That’s why it is crucial to have a pathway to profitability and focus on developing a good margin structure. Especially in this environment, Alex’s advice is to prioritize improving margins, scrutinize the budget, and do everything possible to become profitable.
Alex thinks that one path to profitability is SKU rationalization, which allows a company to focus on a smaller number of products with higher sales potential and better margins. Alex first realized the impact of SKU rationalization when one of his products was cut from Whole Foods.
He explains, "We lost one of our flavors in Whole Foods because it was an underperformer. Surprisingly, our sales did not go down. When the vanilla flavor was no longer available, customers started buying the other available flavors."
This illustrates how limiting the number of products offered doesn't necessarily lead to a decrease in sales. That’s why Alex is a big proponent of SKU rationalization and recommends having a maximum of three to four SKUs that will sell really well. According to him, “A company doesn't need more than three to four flavors to generate $20 million in revenue in this business.”
And SKU rationalization isn’t just about reducing cost and complexity on the supply side – it might even boost demand for your product as well. This HBR article – “More Isn’t Always Better” – highlights a number of studies that illustrate how “paradox of choice” can sometimes (counter-intuitively) reduce sales.