How Matthew Wadiak Is Disrupting the Beverage Industry
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Hello and welcome back to another episode of Living the Red Life. Today joining me is Matt and I'm sure you maybe used or at least know his company. So he founded Blue Apron, grew to 2 billion IPO, millions of customers using it weekly. I've been a fan and I'm so excited for this episode. My name is Rudy Moore, host of Living the Red Life podcast and I'm here to change the way you see your life.

in your earpiece every single week. If you're ready to start living the red life, ditch the blue pill, take the red pill, join me in Wonderland and change your life. So obviously most people know Blue Apron and it became a very, I think, disruptive and fast-growing brand, at least in my eyes. Do you mind just giving a couple of minutes overview for people that maybe know less about it? Sure. Blue Apron was the first meal kit company in America.

providing all of the ingredients and a recipe card that allowed customers to cook step-by-step recipes at home. And we grew from a tiny fulfillment center, originally in Queens, doing about 20 meals or 20 customers per week to millions of meals per week in three major geographies and five distribution centers.

Yeah, it's crazy, right? Like I, you know, I've been a marketer for 12, 15 years and I started in the health space and I did some marketing for a friend that owned a meal prep company. And it's like running a business and marketing it's hard enough. But like just thinking about the fulfillment of going from 20 meals to that, it's like a whole second business, right? The fulfillment of it. So I would love to ask you some questions on that in a bit. But

Let's talk about the juicy growth side first, which is what my audience love. Like what was some of the big breakthroughs or lessons growing it so big? We had a lot of cadence from day one because we, first of all,

you have to understand the era. It was a time in which there was a massive underserved audience. And whenever you see pent up demand, it's about capitalizing on that demand from a marketing perspective to get, um, share of market and, and capture as much total addressable market as possible. Right. So we did something that was really unique on day one. And I, I entirely attribute this portion to my co-founder, Matt Salzberg at the time. Um,

We had initially built a referral program into our initial web product that included rewards for customers. You know, as many companies have rewards for customers who are loyal to their brand. But what we did was a reverse referral program. And back in those days, thinking back 15 years ago,

we would, instead of giving the buyer a reward or a free box for loyalty, we would allow after the second box ordered the, the customer to gift three first boxes to their closest friends. And on its head, initially we had thought, we don't really know how people are going to respond to this because we

It's not a selfish gift. It's not something that people receive personally. It's the gift of giving, right? Yeah, yeah. It was fascinating because we were the first to do that, that I know. And that became a viral sensation. So for the first few years of the company, 80% of our customer acquisition with double-digit monthly growth

sometimes triple digit monthly growth was attributed to our referral program, which was really novel for the time. Yeah, it's fascinating. And I still, I mean, I know some companies do that. I still don't see that many do it.

And I think it works so beautifully for like that sort of product because it's like you're given the gift of health in some ways. Right. And like, you know, I guess 15 years ago, you really hit that health trend. Right. I started in health about 15 years ago. I have a sports science background. And, you know, obviously now there's meal prep and meal kits on every corner. Right.

But yeah, I guess, you know, do you feel you were like part of it? Obviously, there's a lot that went into the success. But, you know, was it like a right place, right time sort of blue ocean thing when you started? Yeah. So if you if you think back to the days of Iron Chef and Emeril Lagasse and the Food Network's peak, when people were still watching cable or more people were watching cable, at least.

There was more interest in food and food celebrity and celebrity chefs than any time in history with less people actively cooking in America than any time in history simultaneously. So I think what we hit was the cultural zeitgeist was saying, we want to do this thing. We want to cook at home. But.

Because people were watching cooking on TV and not cooking at home, a lot of folks didn't know how to cook. So Low Apron ended up being the gateway that empowered folks to learn the basic skills to chop vegetables and prepare a piece of meat and put a basic meal together with their family. So that was embraced. And of course, you know, the rest after that, VCs and PEs jumped on that and advertising went crazy.

Yeah. So you grew initially from this referral system. When did you get serious on like paid ads, TV, social ads, that sort of stuff? Yeah. So acquisition through...

Facebook early days was our first, um, cohorted spend into, um, customer acquisition. And back, I'd say, you know, in the early days of Facebook, two years in or so, we didn't really have to advertise on Facebook for the first year. After that, we started dripping spend into social engagement and spending money on GAC. That, um,

That was fairly cheap at the time. Back then, you could have a business selling almost anything and have... People didn't talk about ROAS back then, but you could imagine like seven or eight ROAS, right? In today's terms. Well, they launched 10 years ago and I was like super profitable on day one back in the golden days. Now you lose money on the acquisition most of the time. Yeah.

Facebook has been smart in that their strategy as a business is to take as much money from their customers as possible without bankrupting the company. It's great for their bottom line, but it's not the sole channel to acquire customers anymore. And we need to be a little bit more educated in our span as modern entrepreneurs. But back then, we could acquire a lot of customers through Facebook and

And then, of course, we had influencer-based ads, early days of influencers and social engagement and paid. And then we started things like My Heart. We did Howard Stern. We did TV. We did direct mail. We really did all of the channels at one point or another. And as the company became more mature, it became clear that

you know, multi-channel approach, like most businesses today, was critical to maintaining reasonable capital.

Well, especially because eventually you create this, like, you know, I always teach, I teach a lot of entrepreneurs and on stage, like you want to become the go-to brand in your industry, right? So like that multi-channel approach, especially for you kind of gave you, you know, that, that, and later I would love to ask about competitors that popped up along the way, because I'm sure there was, you know, plenty that you were fighting off and, and stuff. But before that,

The second part of the acquisition model that I always teach is the LTV. Right. And most beginner entrepreneurs don't understand LTV. I didn't used to. And then when I did, it helped me go to tens of millions instead of a few million because I built a back end. Obviously, you had probably great CAC in the early days. You had all these, quote unquote, free customers from the referrals. Right. Obviously, you had some cough there, but it wasn't bad.

And then you probably had a crazy LTV too. What was your LTV and backend like? I can't without recalling exact numbers from like 10 years ago, it was very good. And, you know, our, our CAC to LTV ratio was excellent. I do, I still look at that. And I think a lot of folks, you know, look at let row us and tacos and, you know, that kind of stuff today, especially Amazon sellers, but I,

it really all boils back down, down to ratios between, you know, acquisition and LTV. And yeah, it was very good. Obviously in the early days without a lot of competition, we had high loyalty. We had high spend on a per customer basis. And over time, you know, when there was more PE and VC, anything good is going to get copied. Right. So when there were VC prop, you know, money out there and CAC was still reasonable, you know,

People all dumped their VC checks into advertising, in many cases at a loss, and it became a bidding war. I think that's something we'll have to be aware of and conscious of is, do I want to grow at this pace? Do I want to attract investment in lookalike companies? And what am I prepared to do? How am I prepared to think about not just where I am today with LTVs and CAC, but what happens annually?

if this market becomes saturated and how I'm going to address that through different channels.

Yeah. And I mean, your business was more than most, I would say, like set up super well for like high LTV. Right. But did you, you know, obviously it's set up well because people love it and that becomes a habit, right? Like a gym membership. If you get into the gym, you stay with the gym generally if it's good. But did you do any specific things to really drive lifetime customer value and loyalty or did you just let it be a good product and people stayed?

Yeah, we had various programs. Like we had a kids cooking school program. A lot of our customers were parents. So in the summertime, we would do an engagement around several boxes in succession that were also learnings, kind of like a summer school cooking where like plant peas and like we'd set a can of soil.

With peas and that one week you'd plant them, the next week you'd water them, third week you'd clip them and use them in a salad. So we had like really cool projects like that. We had lots of affiliate stuff going on. That like kind of reminds me when I was a kid, you had the magazines, you know, and you had to buy every month to get a new piece to build something, right? Like it's similar to that.

However you can engage customers in a creative way is useful because those are ultimately going to be your highest value users and customers. So I love stuff like that. And I think, you know, companies always have opportunities to be more creative. And oftentimes those kind of projects and those retention strategies are, you

you know, are fun and they don't cost much money. So I'd say that that's really important. The other, I think, big opportunity that a lot of entrepreneurs miss out on from an LTV standpoint is really, really good customer service because the distressed customer is really just asking to become a lifetime customer if you treat them properly. So I think having really great CX is critical for any consumer. Yes.

Good. Well, let's move into the customer side. How did you talk to me? There's got to be a cool story about the fulfillment of this. How did that go down? It was a tornado. I've got to tell you. So. So, yeah, we built our first center in Queens. We very quickly moved to a fulfillment center in Brooklyn, California.

And we were packing 20,000 boxes a week on Moudre street in East Williamsburg. Um, just like we had boxes lined up on the curb. We had trucks pulling up to this little one way street, like big semis, like on an hourly basis. And then shortly after, um,

We filled that up. I got on a plane and I flew out to California and opened up our, in year one, our first fulfillment center in Richmond, California. And then very shortly after that, a fulfillment center in Grand Prairie near Dallas, Texas. So on a weekly basis, I was chief operating officer of the company. So I was flying to California and Texas every single week.

as we were hiring thousands of people to run fulfillment. And the challenge was beyond just building lots of stuff that had never been built before, packing food in a way that had never been packed before. So if you go to a grocery store today, anywhere in the world, you'll find fish that's vacuum skim-packed. You'll find an individual steak. You'll find individual chicken breasts. None of that existed.

15 years ago. So it was pretty much foam overwrapped trays. But if you put something like that in a box and you send it in the mail, it's going to leak everywhere.

So we had to really do a lot of innovation around packaging, around little sauces and little small portions of spice packets, things like that. And in many cases, had to build engineering around machines to pack those items that are now used commercially. So actually, a lot of people don't know this, but much of the work that Blue Apron did in lean packaging is now used in grocery stores. You can see it in the grocery store every day.

That's cool. Yeah. Well, a couple of things like, you know, when I, a couple of things I want to ask. So whenever, you know, I scaled some products and offers like to 40 millions very fast in a matter of months, you know, and you've had even faster growth than that. And when it's like, okay, now we're growing like crazy. We've got to really figure out this fulfillment side. I'm always like,

Who can we hire from a top firm that's done it for 20 years? Was there any of that, like you went and hired like some really top experts or were you just trying to figure it out as you went? We tried to. We looked at a lot of 3PLs to try to manage fulfillment for us.

At the end of the day, so I'm actually, my history is in food and cooking. And I started my career as a chef before I started my first business. And, you know, that migrated into Blue Apron over the years. So for me, being a food person, the quality of ingredients was really important. And part of the problem with the food system is that you can buy really commoditized food.

and have it packed for you in scale. But the kind of ingredients that you can use in a recipe is highly, highly limiting. So that wasn't an option. If we wanted to use really great pasture raised meats and fresh herbs and organic produce and things like that, we really needed to work with farmers and then pack those ingredients ourselves. So

Behind the scenes, besides fulfillment, we built an entire supply chain around 250 farms, growing food specifically for Blue Apron and then packaging those ourselves because that was our only option. So while it would have been nice to work with three PLs, the issue is that they're generally expensive. And, you know, if you're not dealing with commodities or basic services like shipping and packing, you're

In food, expensive, time-consuming, you lose all semblance of quality control. And that also affects customer service and customer-oriented rock. So we did it when we built it. It was a lot of work. It's amazing. And it must have felt like two businesses, right? Like one is the marketing business growth side. And then you've literally got this second fulfillment business.

Yeah, so everybody's seen the office and you know that like there's a big separation between the office and the warehouse, even though they're in the same building. We definitely had that complex where we had our engineering side, our web product, our marketing, our big office in New York City. And then we had all the fulfillment centers.

Yeah. Yeah. And what about, you know, I always like to say to every entrepreneur, like social media and stuff, you see the highlight reel, the good, but there's a lot of, you know, BS along the way and failure every day and stuff. So like with the one nightmare with logistics and that you always remember or one story.

There are like almost too many. Yeah. I mean, yeah. So I could tell something anecdotal and kind of funny. Sure. So one customer called up or sent an email. I can't remember. And she was convinced that there was the tail of a rodent in her box.

When we were all freaked out, so she sent this blurry cell phone picture, 15-year-old cell phone. I'm not a great picture. And we're like, oh, my God, that's so horrible. And I think our ops manager's name was Gary Kliegman, got on an airplane, flew out to her house, was so apologetic, wanted to inspect the beast, and opened it up, and it was a beetroot. Oh, God. Beetroot.

Yeah. So like stuff like that, you can just imagine tales like that and just like suffering and just a lot of boxes in transit all the time. So a lot of funny, funny stories and, you know, stressful times like running out of an ingredient and, you know, halfway through packing boxes or something like that. Power outages, you know, natural disasters, all kinds, all kinds of stuff. But ultimately fresh food.

I was just going to say fresh food is like a different game. You know, I remember this when I worked, you know, did the ads for this. I was doing the marketing for this meal prep company and they weren't obviously close to your size. But even that, it's just like listening to it all. I'm like, I'm glad I'm not in this business. Yeah.

I will say when you're working with people like that, the ops team, the marketing team, my co-founder, Elia, who is our CTO, you build these kind of friendships that are just like, these are my guys for life. We're just so, so close and connected even today. And it's nice to have gone through that experience with like-minded folks.

Yeah. And I mean, one thing that I think entrepreneurs don't realize, too, is like if something goes wrong with a customer, it's like you figure it out and fix it for them. But when you get to a company your size, it's like if there really was a rat like tail in a box. Right. And then the PR gets it. It's like it's like the end of your business all of a sudden sort of level. Right. So moments like that. In reality, something happened. You know, people tend to be pretty forgiving as long as they can.

poison somebody or whatever. But, you know, we were hyper vigilant around that kind of stuff. We were young and we were, you know, we wanted everything to be the best. So we put a lot of work into it. But there were there were a few funny stories like that along the way. Yeah, I can imagine. So let's talk about the last couple of questions around this. Like, how was it more near the time where you, you know, you took it public or near the end of your journey? And then, you know, what are you doing now?

Yeah, so folks looking to exit a company, whether it's a sale or IPO, a lot of the business becomes oriented around, you know, readiness for sale or IPO, which includes a lot of internal audit, a lot of systems. You know, at one point we were running...

you know, hundreds of millions of dollars of revenue on QuickBooks, you know, like putting an ERP in place. I'm like the old school, the med suite, med suite. It's an easy today, but it was really difficult back then, especially when you're transferring over that much receivable and billing and complex systems. So, so I, I would say, you know, there are challenges associated with that. Any entrepreneurs out there listening, integrate your CRM and your ERP early and,

Don't do what we did. And, you know, the culture changes a little bit around that. Certainly there's, you know, excitement around those events, but, you know,

It's very important to not lose creativity and engagement and innovation around product because many companies get to that point, probably including Blue Apron, and fail to innovate at the speed that they need to as they did when they were early because they're becoming more conservative. They're worried. They're getting ready for this financial event. And the financial event should not define the company. The company's innovation should define the company. So

So I'd say that that is, you know, was an area, the financial stuff was an area of focus. I think, you know, in hindsight, it's important to make sure the creativity and product innovation remain at the most important, the highest level.

Yeah, especially, you know, because I've sold and nowhere at this scale, but like often like I even myself, it's like when the LOIs, you know, and then you're going through the investigation phase and audit phase. I almost felt myself like get lazy with that business because I'm like, I'm about and then but then it always takes way longer or the deal falls through. And now you're like, oh, crap. Right. So that's a great, great. A lot of deals have flown through in the last quarter because you did.

numbers because you're focused on the event. So that happens more than people think. I mean, it's way harder to sell than most people realize. Like even me selling businesses for millions, not, you know, billions. It's like there's so much that goes into it that you don't realize that it is a big distraction. Absolutely. Yeah. And of course,

lawyers are taking they're the only ones who are profitable and evolving you know for sure yeah yeah that's always the way with lawyers right they're the only ones that ever win um all right so what about like what how was it like after the after you let like you know this thing you feel now you've obviously been successful big exit how did you feel and what was next for you

Yeah, so I've explored a variety of opportunities in food. I'm currently, I'm in my lab today as there are 3D printers in the background. I'm excited now having worked in a world of packaging and seen so much impact, you know, from an environmental standpoint, a consumer standpoint. Obviously, I don't know if you've been following the news on, you know, now Friedman's list, plastic list, another great option for food.

And we just have plastic in everything. And the news last week is that adults have the amount of plastic, the size of like, you know, a plastic spoon in our brains, all of us. And that's just scary. So we get that plastic out of our food. How do we get it out of our food system? How do we get it out of our beverage containers, which are the worst?

leakers of microplastics in our brains. So I'm working on a product now and I'll just give you personally, I know that some of the people at home can't see it, but we have a little metal pot instead of a plastic bottle. And this is a water bottle. This is what I'm showing now is glass, but we'll have a glass metal version. And this is really cool. This guy, this fits into there and clicks in and

Wow. And basically, you can drink your iced tea, you can drink your beverages, you can drink your electrolyte solution in a pod now. So this IP is coming to market later this year. It's called Capsule with a K. Nice.

Even my favorite. Did you get the red intentionally or was that by accident? It's red. It's red for you. Yeah, good. I love it. Let's hold this up and our screens match. Yeah, yeah. That's great. So how long have you been working on that?

So this is about five years of patent writing and submission to the U.S. Patent Office. We have about a dozen international patents. And it's really around dispensing concentrated solution in a pod, which can be anything from coffee, tea, to electrolysis, hydration, whatever.

Yeah, I mean, I'm big in sport and I go, you know, I do triathlon. I have hundreds of little packets, right? I have electrolytes and stuff. So I, yeah, yeah, I can really see that taking off. It's awesome. So that's really cool. So last couple of questions as we wrap up today, just around entrepreneurship, I always try and ask these, like in general, what was your biggest like, wow, moment I made it or like biggest win you're proud of in business?

It's an interesting question. You know, I, I think when you're in it and you're really in it, you're you, you never in your head feel like you made it, even though you might be millions of people, even though celebrities might be talking about it every week in the, in the news, you know,

you never really feel that. And that's the weirdest thing. I guess now in retrospect, seeing the impact that that kind of cooking had on such a huge amount of people and meeting kids who are now adults who were children when they started cooking and they learned to cook through blue apron, I can, I can now take a step back and appreciate what we did for the food system and how much good became of, of teaching a new generation to cook. But I think when,

When you're really in the weeds, it's hard to really... Well, I think it's hard. Yeah, I think it's hard because it comes back to what I said. Because at the same time as that, you've got someone ringing you saying they've got a rat's tail in their box. You've got an employee suing you, right? You've got this, you know, this... Ten other things happening with ten of your other employees. A warehouse messed up a shipping order. And you've got...

The finance guy wants a million things over here. The Chinese need answers to all these. That's what people don't realize, especially a business your size, I imagine. They all run simultaneously together. In a new big company, it doesn't matter what you're doing.

everything is trying to break your business. Everything in every department all the time. So I think later, once businesses are more mature, it's not so crazy. But in a growing enterprise, it's very hard to appreciate the moments. I will say the thing that we did appreciate was

And this is really important culture. We had such a good culture in the moments that we had, the team outings, the team events, the team meetings, the team is really the company. Product is in the company, to be clear. The team and the people are the company. Everything we've talked about today is irrelevant without the human beings behind it. Yep. How many stacks did you get up to?

I mean, total, I think in our peak, like 6,000. But, you know, the core folks who were like the early ride or die people, you know, the couple hundred folks who were, you know, just there for the entire time, they were a special breed. And almost every one of them today is either a CEO or COO or founder of another company.

That's really cool. Cool. Well, last couple of questions, similar entrepreneurial question. I always ask if you could go back in a time machine to your younger self and tell yourself something, what would it be? You know, as a younger person, it would be more about how, and I think a lot of, a lot of more mature executives say, give this answer, but I think it's really true. Like calm down, like work on your messaging, work on your communication,

Listen to people more and you can still push hard and you can still, I think, drive people to be successful. But there are there are more effective ways of doing that than, you know, losing your temper or shouting or having things done now. Or, you know, I just think I just think communication would have been more helpful, helpful for me as a younger guy.

Good. Love it. And last question, where do people find more about you, learn more about these stories, the new company and ventures? How can they find you? I'd say look, look forward to capsule drink. Capsule dot com is going to be coming out with a K drink. Capsule dot com is going to be the new product and we're going to change the way people reduce plastic and drink their electrolyte.

Love it. Matt, it's been a pleasure. I know we could have, I could have asked you a hundred more questions. So maybe I have to get you back on down the line when, when this new venture really is like fully live. I'd love to see how it, how it grows and so much, you know, cross views for that across so many areas. Right. So awesome and super awesome to hear the story and just a small speck of the story. So yeah, really appreciate you coming on. Thanks so much, Rudy. Really appreciate it. Cool. Great to be here.

Thanks. All right, guys, that's the wrap. Keep living the red life and I'll see you all soon. Take care.