Melissa Martinelli - What is surplus whey? Crafting DRINK SUPERFRAU! Getting into 400+ Stores and Fighting Climate Change

Melissa Martinelli is the founder and CEO of Superfrau.  Melissa was an immigration lawyer and pivoted to crafting delicious Super Sodas made from surplus  fresh whey that is generated during the youghurt fermentation process. She has been featured on the Boston Globe, was a speaker at the Tufts University Food and Nutrition Innovation Institute, and her company @drinksuperfrau has been touted as a top key player in the growing upcycled foods industry.
 
Listen to her journey, the highs and the lows, and how she went from spark of an idea to over a hundred stores in a couple years. Her company, Superfrau, is on track to be in over four hundred stores nationwide this year.

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Transcript

Melissa Martinelli (00:00.054)
In the case of cheese making, it's 90, 90% of the milk that ends up as liquid whey when you make cheese. And for yogurt, it's about 67 to 70% for a Greek style yogurt. And I couldn't believe that we were throwing out this liquid and to me, it was just such an exciting and interesting waste to value opportunity.

Anne McGinty (00:32.354)
Welcome to episode 12 of How I Built My Small Business, the show that is dedicated to sharing the insight that entrepreneurs have about how to start and grow small businesses. Join us as we unravel the stories behind their entrepreneurial journeys. I'm Anne McGinty, your host, and today I'll be chatting with Melissa Martinelli, the founder and CEO of Superfrow. Melissa was an immigration lawyer and pivoted to crafting delicious super sodas

made from surplus fresh whey that is generated during the yogurt fermentation process. She has been featured in the Boston Globe, was invited as a speaker at Tufts University Food and Nutrition Innovation Institute, and her company Superfraud has been touted as a top key player in the growing upcycled food products industry. Her drinks are making waves in cities and major grocery stores across the country. You can find a link to her website through to her business in the episode's description.

Anne McGinty
Thank you to our listeners for being with us today. I am so excited to have our guest. Melissa is calling in from Austria. Melissa, welcome to the show.

Melissa Martinelli
Thanks Anne, so excited to be here. Thanks for having me.

Anne McGinty
So let's just jump right in. How did Superfrau! come to be?

Melissa Martinelli
I was inspired to leave my career as an immigration lawyer to start Superfrau! for many reasons, but the first thing that happened was I was on a hike in the Austrian Alps with my then partner who's from the Austrian Alps and we got to the top of the mountain and in Austria it's so cool. They have these little huts at the top of each peak.

where they serve you fresh cheese made from the milk of the cow that is literally right outside roaming in the hills and beer and amazing charcuterie and literally every hike you go on there's some kind of presentation like that and on this particular one they came out with a cold glass of a drink that

Melissa Martinelli  (02:50.046)
I had no idea what it was and when I tried it, I was really blown away with how refreshing it was. And I learned that it was fresh whey, not the whey protein powder that I was familiar with, but liquid whey that you get when you make cheese or yogurt. The milk separates into curds for the cheese or the yogurt and liquid whey, which is loaded with all of this really essential nutrition.

And it tasted like a really super fresh, not sweet Gatorade, if I can describe it that way. I could tell it was loaded with electrolytes. It had that kind of saltiness to it. But it was so refreshing. And they had crushed blueberries in it. And I said to my partner, what is this? And he said, yeah, this is whey.

This is a really popular drink here. There's a brand that I grew up drinking every day. Even my mom sends it to me in America because there's nothing like it. And we just got talking and talking about it and I couldn't stop thinking about it. And when I got home, I started to ask around local cheese makers and yogurt makers, like, what are you doing with your whey? And I learned that in the US, most cheese makers and yogurt makers are just dumping their whey. They think of it as a pesky byproduct.

And in the case of cheese making, it's 99% of the milk that ends up as liquid whey when you make cheese. And for yogurt, it's about 67 to 70% for a Greek style yogurt. And I couldn't believe that we were throwing out this liquid. And to me, it was just such an exciting and interesting waste to value opportunity. And it wasn't so different than...

My career as an immigration lawyer, to me, it's all interconnected. And the number one reason for forced migration, one of the biggest reasons for forced migration are issues related to climate change. And one of the number one causes of climate change is food waste. So it was all very circular thing that happened. I have no business.

Melissa Martinelli  (05:08.214)
being in the beverage after having a career as an immigration lawyer, but I've learned a lot in the last several years. And I kind of just rolled up my sleeves and was so passionate about the idea that I took to learning everything there is to know about developing a product and launching it and making it an actual business.

Anne McGinty (05:37.842)
Where did you go from there?

Melissa Martinelli
starting a business was I came back from Austria. I asked around about what are local makers doing with their whey. I learned that it was often thrown away. And then I just got to talking to them and asking, can I have some of your whey? And I started making some whey drinks in my kitchen. And then I had some whey parties and asked people to tell me if they liked it too, because it's definitely

unique taste. And I wanted to make sure it wasn't just me that liked it. So I had a lot of parties and a lot of surveys and got the courage to do a bigger prototype out of a commercial kitchen in the Boston area. There's a shared commercial kitchen called Commonwealth Kitchen in Boston that is really focused on nurturing food businesses built by women and minority owners. And

I connected with them, shared my idea, my business plan with them, and they allowed me to use their shared commercial kitchen space. So I developed three flavors out of their shared commercial kitchen, and I launched our prototype into the Boston market in the summer of 2019. We were in one farmer's market, which was a very big one in Boston, a very popular one, and we were in a few specialty retail locations. I was self-distributing.

And we got noticed by a Whole Foods local forager. And I was not prepared to be distributing to Whole Foods. So we really just kept in touch with that buyer. She was really into the idea of Super Frout and the product that we had. But at that point, it was not scalable. I was really just testing the market to see who was drinking this. When would they drink it? Why?

I know, how could we make it better? What were you bottling and canning your beverages in at that point? Yeah, I had these super cute square PET plastic bottles. And I was in the beginning handwriting way puns on. I think you can find it online. Our original product had eat way love was our peach mango flavor.

Melissa Martinelli (08:03.734)
This is how we do it was our cucumber line. I was literally just really leaning into all the puns. But I really knew that was not the ultimate packaging. It was such a cool opportunity to be able to share it with the Boston market and collect a ton of feedback and redevelop the product. And what was simultaneously lucky is that I got into an incubator program with Pepsi.

and that came with the $20,000 grant.

Anne McGinty
How did you get into an incubator program?

Melissa Martinelli
You know, I still to this day think it was a mistake that I was accepted into the program. I think you had to have a million dollars in revenue and I think I had like $5,000 in revenue at the time. And my guess is that they thought when I said 5,000, they thought, oh, she must mean 5 million.

I did not belong there, but it was very cool as their greenhouse accelerator. So it was all companies that had a focus on sustainability. And I got to learn so much, but it launched literally in March of 2020. And our first meeting was canceled due to COVID and everything went virtual. I still learned a ton and I still got the grant. And what I did with that grant was I made our product shelf stable.

It was a game changer, having it go from a refrigerated product with a... We actually had a 60-day shelf life because I used high pressure processing to extend the refrigerated shelf life. But going from a 60-day refrigerated shelf life to a two-year shelf stable product was a real game changer for us. And part of it was switching the packaging from something that wasn't really in line with our mission around sustainability.

Even though it's obviously recyclable, just plastic isn't as recycled as aluminum. So we switched into infinitely recyclable aluminum cans and we made it a little fizzy for fun. We got some feedback that people would like that and think it was more refreshing. We updated our flavors. We took out any added sweetener. So really our product is just...

Melissa Martinelli  (10:27.698)
liquid whey and we infuse it with natural flavors. We add a lactase enzyme to break up the lactose. So someone who's lactose intolerant might be able to enjoy it. And that's really it. So it's minimal ingredients. It's low in sugar, no added sugar or sweeteners. And it's a super refreshing, healthy alternative to soda. I think what we're still learning is how we

describe it to our customers because it has so many aspects to it. And really, what are we focusing on? One thing that I learned over the last few years is backing into the customer need is really challenging. And for me, the opportunity was in the supply chain, taking something from a yogurt manufacturer that was going to waste and creating something valuable out of it was really interesting to me.

Melissa Martinelli  (11:25.75)
really, really focused more on the customer need. And luckily, we were listening to the customer a lot over the years. So we've honed in on that. But if I could have started with that information, what's the customer missing, I could have maybe brought better messaging in the beginning.

Anne McGinty
So you're saying you would have done some sort of like a focus group and gotten that information before you even started?

Melissa Martinelli
Yeah, it's so hard. It's always kind of like the chicken or the egg. But

Yes, but focus groups are very expensive and we did not have any money. We launched this with $10,000. And then we got that $20,000 grant. And then we had some momentum and then we got some interest. And the biggest change for us was when Gary Hirschberg, the founder of Stonyfield, heard about our product and invested and that brought on other investment, we raised about

launched successfully into Whole Foods.

Anne McGinty
How did Gary Hirschberg find you and how did the process go negotiating an investment?

Melissa Martinelli
Gary Hirschberg, every year, actually twice a year, hosts a seminar, and it's a two or three day seminar where he gets all players from the natural food and natural products industry really, because it's not just food. Together in a room and

We talk about the future of food and how to be successful. And in 2020, that seminar, which was previously maybe not so accessible to someone like me, went virtual. And I think it was like $50 to attend online. And I thought, yeah, this seems like a good opportunity to attend this virtual seminar. And then they had this pitch.

program where you could pitch your idea to a bunch of natural food and beverage investors at the seminar virtually. And I applied and I got to pitch and right after my five-minute pitch, Gary said, well, I want to follow up. Who else wants to follow up? And he, as a founder of Stonyfield's yogurt, really knew the problem, the surplus-wave problem and how for Stonyfield and other Greek-style yogurts.

Melissa Martinelli  (13:52.01)
almost 70% of the milk is just going down the drain or it's a cost center, it's being hauled off properties and maybe back to farms to feed livestock, but otherwise it needs to be properly disposed of because it has so much nutrition in it. If it gets into water supplies, it can cause algal blooms and fish kills. So really, it's a problematic byproduct that in other countries around the world is really

looked at as this incredible ingredient. It's a versatile ingredient. It's nutritious. It dates as far back as Hippocrates, the founder of medicine, was prescribing liquid weight to his patients over 2,400 years ago. This is an ingredient that is so loaded with nutrition. The fact that in the US, it's a byproduct issue that manufacturers don't know what to do with. There are literally oceans of whey. There's so much opportunity to do something with it.

I really see Superfrow as a platform for the ingredient. I have a lot of ideas in the pipeline. It's very exciting. And there's a few other players in the space that are doing something with Wei, and we're kind of, we're working together, which is interesting. I don't see them as competition. We're really working together to educate the consumer on what this ingredient is and its power.

Anne McGinty
It's fascinating, and I can see how much opportunity there must be.
Going back a bit, how did you use the investments that you received?

Melissa Martinelli
I used that to manufacture our products and launch it into Whole Foods. Originally, our go-to-market strategy was direct to consumer. It was 2021, we were just off of COVID and people were buying a lot online. And it seemed like

a really great opportunity for a Gen Z focused brand. We launched online and the day we announced our e-commerce platform was live, the Whole Foods buyer that I had met at a farmer's market in 2019, she was on our email list and she reached out and said, let's get this in stores. So I really shifted our strategy from an e-commerce first to supporting Whole Foods.

Melissa Martinelli  (16:15.858)
And a lot of that money went to marketing around that because it is a very competitive space and our competitors have a lot of marketing dollars. And if people aren't aware of your brand, you can get on the shelf. It's really hard to fly off the shelf at the rate that you need to in order to be successful at a place like Whole Foods. It's a really crowded shelf.

really sticks out because of our bold colors and we color block on the shelf. So in some Whole Foods, you see us and the whole shelf is magenta and it's eye catching. So that's helpful, but that is not enough. And so really, we put a lot of dollars into brand awareness, demos. I can't tell you how many demos I've done in the last few years. I've looked at your website and I've seen the cans and instantly thought that is incredible branding.

Anne McGinty
Who did you work with for your designs?

Melissa Martinelli
We worked with two women. The company is called Fenomenal with an F and it was very serendipitous. We were about to launch a product in a PET bottle in the beginning of 2021. And we were moving forward and I got a call from our supplier saying that the bottles

we wanted that we needed for our product were not going to be available until 2023. Ooh! And this is a very big supplier that I was connected to through Pepsi. So it was a huge oh, no, what do we do? And we had done some testing of our products in an aluminum can. And we had to switch very quickly. And at the same time, I got a LinkedIn message from

the founder of Phenomenal saying, I really like what you're doing. Let's talk on how we can work together. And I responded and I said, I need a lot of help. I don't have a lot of money. What do you wanna do? And we talked for a really long time and it was really like we courted each other for a few weeks. And I was like, we have this really quick turnaround. We have to switch everything.

Melissa Martinelli (18:39.642)
our branding, our whole identity, everything, because we're going from something that's more like a sports drink to something that's more like a healthy soda. Can you do it? And they were incredible. We did do some consumer testing, consumer feedback testing with our products in the cans and with the different branding. And we got so much great feedback and landed on this design that.

I really loved it was funny because if anyone knows me before Superfrau I'm sort of like an earth tone. And this is so different and I was like, well, when we make t shirts, do they have to be pink? We really got into it. It's so perfect for what we're offering because the contents of the can are also bold and exciting and

It's different. It's not sparkling water. And it's really this unique thing. And I think the can delivers on that and it's messaging as well.

Anne McGinty
I think the branding is really attractive.

Melissa Martinelli
Thank you.

Anne McGinty
So you're mentioning that at Whole Foods, the space is very saturated. Who are your biggest competitors?

Melissa Martinelli
So we're in this refrigerated functional beverage section, which most grocers don't have a functional beverage section and functional beverage just means

a beverage that delivers on functionality like energy or gut health. Think that functional beverage aisle started with the increase in kombuchas and coconut waters, and they created this functional beverage space. So our competitors are on that shelf, like kombuchas and mostly the gut healthy sodas that are out there like poppy and olipop, who also have bold branding like ours.

But what Superfrau delivers is energy, it's hydration, and it's gut health. So we compete against all of those, the natural energy drinks, coconut waters, and healthy soda alternatives that are focused on gut health as well as the kombuchas. So it is competitive and it's been really cool to see how a little business like ours can

Melissa Martinelli (21:03.458)
take up some space in a category that is really well-financed.

Anne McGinty
And it is a big nation and a big world. So I don't know if you have plans to go beyond the United States, but it seems like the market is there.

Melissa Martinelli
That's right. What we're looking at now is Europe already understands what Liquid Way is. We don't have that added educational challenge of explaining what.

the ingredient actually is, it's a really sleepy category here. So Superfraud would really spice it up and we've already had some conversations about that. So it's a really exciting opportunity to expand into not just other regions of the US because we're primarily only on the East Coast right now, but to look at what we could do internationally.

Anne McGinty
And about how many stores are you in now?

Melissa Martinelli
We're in just over a hundred. So we're still very small. We're...

looking to expand into two new regions of Whole Foods this year. And we are in a bunch of mom and pops throughout the country. So really focused on smaller retailers where we can support them. We're also launching with Sprouts nationally this year.

Anne McGinty
Wow.

Melissa Martinelli
Yeah, yeah. And that was another Gary Hirschberg connection. Finally, in 2023.

The Hirshberg Entrepreneurship Institute went live and I went to Denver and I had an opportunity to pitch to Sprouts in front of everybody. And they said we were going to bring you on to our innovation set, which is super exciting. So we get to test the national market in Sprouts this year.

Anne McGinty
That's amazing. I don't know how many stores they have, but I know we have them out here on the West Coast. So I'm looking forward to seeing it there.

Melissa Martinelli
Yeah, they have a 300 store. So it's a 3X for us. Yeah, it's exciting.

Anne McGinty
Wow. Okay, so how does that work when a store decides to bring your products in? Because I know they work with distributors. So what is the process like getting your products carried through the distributors?

Melissa Martinelli
Yes, Sprouts works with Kehe. I work with a very small distributor.

Melissa Martinelli (23:26.606)
called Rainforest and they serve the three regions of whole foods that were in one region and they serve the two others that we're looking to expand into this year. Getting into distributors is a beast and I could spend a whole podcast talking about it. But very briefly with our Whole Foods account in the New England region of Whole Foods, we work with a small regional distributor that...

I love it's so much more manageable than the national distributors like Kehe that serve sprouts or whole foods nationally. There's UNFI. These are all, in my humble opinion, hopefully no one from those organizations are listening, but necessary evils. They're really, really hard on small businesses. And you have to be very careful navigating working with distributors.

go to launch into Sprouts. We actually had a really great opportunity with Kehi as a woman-owned business. We got a special opportunity to launch into several distribution centers of Kehi without the upfront costs that they typically charge. So that's great. I do recommend becoming, if you're a woman-owned business, becoming certified woman-owned because there are a lot of benefits of that.

like sometimes slotting fees, getting into retailers are waived and like these opportunities with different distributors. But there is one other really unique distribution opportunity through pod foods and their model is a hybrid model of a couple different ways you can get your product to the end consumer and

it's less painful for the supplier. So Pod Foods is a great opportunity for smaller brands looking to launch nationally and Sprouts does work with Pod Foods as well. What they do is a little bit more of like a consignment model so you don't get major chargebacks if you're not going through the inventory at a pace that you need to be and many other things that can really cause major

Melissa Martinelli (25:45.102)
cash flow problems for a small business.

Anne McGinty
I was curious to know about the costs that is associated with distributors. So what kind of a margin do they expect to make? And it sounds like there are the holding costs if your product's not moving. Is there anything else?

Melissa Martinelli
Yeah, there's so many little secret things that they don't tell you about. But when planning, I was always advised, you kind of want to split your total costs three ways.

a certain margin for you, a certain margin for the retailer and a certain margin for the distributor. So we kind of always assume it's going to be somewhere around 30%. And sometimes more sometimes less. And it can vary because with UNFI and Whole Foods, they have a very low margin because they're already going to all the Whole Foods and it's a good deal. So you can offer Whole Foods potentially a better price.

because you know that the margin that UNFI is taking is much less, but they don't give you any attention. Like a smaller distributor might go into a store and make sure that your cans are on the shelf and facings are correct. And if they aren't on the shelf, they make sure that it's reordered or UNFI is really just dropping it off at the loading dock and not really checking on your product. So that...

7% or something like that. I don't work with UNFI, so I don't know exactly what it is. It's 7% or 9% is really just getting your product from your warehouse to the store and not making sure that it's even on the shelf. But even with smaller distributors where you're sometimes paying somewhere around 30%, and they say that they're making sure your product is on the shelf, the brand really has to make sure. They really have to go to each store.

Anne McGinty
So you have to send people in.

Melissa Martinelli
Yeah, which is a cost. And so you have to build all of that into your model. There are merchandisers that you can pay to make sure your product looks good and is at multiple places throughout a store. So in some stores for us, we have product in the refrigerator, but also on the center aisle with other shelf stable drinks, or also on the local rack.

Melissa Martinelli (28:07.758)
costs a lot of money. Every store you launch into, you want to try to do some kind of promotion that may involve demos, may involve just coupons. Whole Foods is now charging more money to do promotions that they require.

Anne McGinty
No.

Melissa Martinelli
Yeah. The cost associated with getting a product to market and into a consumer's hand is...

so enormous and it really at times makes me wonder how does anybody do this and how do people get their prices to a point that's affordable to the end consumer when it costs so much to just get it to them.

Anne McGinty
So what is your company's expense pie chart look like? Our largest expenses really are in brand awareness and marketing because we're educating the consumer. That's our biggest

relatively low because 98, 99% of our products is liquid whey that we take off the hands of yogurt manufacturers. And so we keep our cost of goods pretty low.

Anne McGinty
Is there a fee associated with getting that liquid whey?

Melissa Martinelli
What we do as we develop the supply chain is we're paying to move the liquid whey. So that is not cheap. But as we build our brand and really

the consumer demand for such a product, something like this would be taken in-house. So we wouldn't be trucking around the liquid anymore, but we don't pay for the whey. What we're doing for the yogurt manufacturer is taking away what they do to pay to have their whey hauled off their property. So they no longer have that as a cost center, and we have our main ingredient.

Anne McGinty
It's a win-win. I love win-wins.

Melissa Martinelli
It's a really great win-win.

Anne McGinty
So can you guide us through your flow chart? You get this whey from, it sounds like dairy farms that are gonna throw it out anyway, and then you truck that. Where do you truck it to? And does it need to stay refrigerated?

Melissa Martinelli
Yeah, so we get our way actually from Greek yogurt manufacturers. So a Greek yogurt manufacturer might get their milk from a local farm. That is...

Melissa Martinelli (30:30.562)
trucks to them, they make their Greek yogurt. And in that process, it separates into the yogurt curd and the whey, and we just pipe that whey into a tanker and take it to our contract manufacturer, where we infuse it with our flavors and can it. So it's a very straightforward process. There's obviously a few proprietary aspects of it in there, but really it's so

simple. What my vision for a product like Superfrau is, is that it makes sense for every yogurt manufacturer to be making a product out of their whey. And similar to whey protein, which is often the more lucrative side of cheese making, maybe whey drinks or other products made from whey from yogurt.

could eventually be even more lucrative than the original main product, the yogurt. But yeah, that's our supply chain process. And then once we manufacture it, we have several distribution centers, one that's focused on only e-commerce, another one that supports our New England distribution, and one other small distributor that supports just Western Massachusetts.

Anne McGinty
So you don't have any of your own warehouses, everything goes straight from the contract manufacturer out to the distributors and there's no other holding?

Melissa Martinelli
That's right. I work from home, so I don't have any office overhead. I don't own any structures. We own this process and we own this brand. And that's what we're building is the process and the brand to really make sure that this ingredient doesn't go to waste anymore.

Anne McGinty
Amazing. You mentioned contract manufacturer. I'm assuming that is the same as a co packer.

Melissa Martinelli
Yes. All this lingo, it took me a little while to learn, but yeah, co-man, co-packer, contract manufacturer, it's all the same thing.

Anne McGinty
And what was that like the process of looking for a co-packer or a contract manufacturer and then negotiating the contract? Did they have minimum runs? Can you lead us through that?

Melissa Martinelli  (32:52.318)
Anne, it continues to be
one of the most challenging parts of this business, which is part of the reason why my first hire was a director of operations, because I could no longer run this brand and get it out into the world and deal with all of the chaos behind the scenes of contract manufacturing. We started out very small manufacturing it ourselves, and then really got the formula to a point where we could scale it.

And we had to take a big risk with scaling up to a point where our cost of goods made sense, and we could have a decent margin as we got started. Our goal was always a 40% margin in the beginning. And we had that and now we have an even larger margin than that. We're at about a 57% margin, which is really

rare and that's great that's high yeah it's really good for beverage and part of it is because our main ingredient is free but we worked really hard to get to that point it was a lot of negotiating my first contract manufacturer bailed on me last minute and i had to switch and then i found a local one that has been great so i could go to the facility and kind of

be there and not let go of too much control, which was really hard as you kind of put your baby out into the world. And you know, as we grew from there, we had a hard time negotiating getting our price down more and found another contract manufacturer that could give us the price that we wanted. And then they also bailed last minute one time when we had our fresh ingredient all on its way there. So it is a jungle out there.

needs a therapist about their contract manufacturing experiences. I'm happy to talk to them. So challenging, but I've been really lucky to have a great director of operations who had a lot of experience in food and beverage manufacturing and everything that seemed to me like it was the end of the world. She handled like the pro that she is and I brought on our director of operations just before all of these operational challenges got.

Melissa Martinelli  (35:12.65)
way beyond what I could ever handle on my own.

Anne McGinty
But good for you for recognizing when you needed the help and acknowledging what skill sets you lacked so that you could fill it with somebody with that experience.

Melissa Martinelli
Yeah, I think the journey of particularly a solo entrepreneur is like really humbling and you learn very quickly what you're good at and what you're not good at or really what you have the capacity for. Maybe another arrangement, I could be good at it

my bandwidth, which was only so much. And at times I was going to five different Whole Foods in a day doing demos. It sounds like it's not the best use of your time, but you have to do that as you get out there. And you really do have to do that in the beginning. That's my firm belief. And when you have operational fires happening at the same time, it's just that's impossible. And then, you know,

Not to mention two kids.

Anne McGinty
And, How many employees do you have?

Melissa Martinelli
It's me and my director of operations, Stephanie. And then I outsource, I have a great financial team. I have an incredible advisory board and I outsource our marketing still to Phenomenal. So they're native to our whole brand. They created our brand and they do all of our marketing. So they did our website, they do our social media marketing.

really incredible. And a lot of people will advise you against having one firm do all of that. But in this case, it really worked.

Anne McGinty
So you mentioned an advisory board, how do you go about building an advisory board?

Melissa Martinelli
My advisory board is my secret superpower, because I came into this as an immigration lawyer. And having a service based business background is so different than a consumer

And while I'm a highly motivated individual, I really lacked a major skill set. And I knew that right away. And I actually ended up participating in this program at Babson called Women Innovating Now. And I think the best thing that I got out of that was the recommendation to have an advisory board. And so I leveraged a lot of networking over the years to build my advisory board and kind of fill in

Melissa Martinelli  (37:36.494)
personal weaknesses. So I have somebody that has a really strong background in sustainability, one that has a strong background in supply chain and distribution, one that has a great CPG background. I have Ethan Hershberg, who's Gary Hershberg's son, and Ethan is the founder of Ethan's, which is a very successful energy drink made out of organic apple cider vinegar.

Gary said when he invested, he said, I really want Ethan to be on your advisory board because he's very close to the stage that you're at in terms of launching a beverage company. And Ethan's advice along the way has been really invaluable because he's just maybe three or four years ahead of me and can kind of tell me what all the pitfalls to avoid and has some really up-to-date information on all the good things to follow as well.

So I have a great advisory board and I lean on them. We have quarterly meetings and then I talk to each of them in different ways pretty regularly.

Anne McGinty
With an advisory board, are they meeting for compensation or is this just goodwill?

Melissa Martinelli
Some of them are already investors. And then the ones that aren't, I actually use a format that was provided through the Babson Women Innovating Now Lab that

had a sort of compensation structure. So I'll do an example. Depending on how much time they offer and their expertise, they would get 0.25% of the company at a certain point in our journey. It's primarily out of goodwill and because they believe in the idea and they believe in me. And there's a difference between an advisory board and a board of directors. And then advisory board is really there to support.

the founder and I am so glad that I built one and I recommend one to every founder out there. It sounds like there's so much to learn. It's like this influx of information coming at you. That's the coolest part about starting a business is that you kind of get to go to school on your own terms. And I'm always learning. And I know that you could do that at a job, but it's really different when it's your own.

Melissa Martinelli  (40:03.766)
little baby and it's so exciting and this is going to sound trite, but the highs are really high and the lows are really low and you're going to hear that from any entrepreneur and I know you know that as well. I feel every high in such an extraordinary way and the lows can be super painful and it can happen 15 times a day. You go up and down, up and down.

If someone told me that, I would be like, yeah, you're exaggerating, but it really, really is like that.

Anne McGinty
With Sprouts, what is that new partnership going to look like?

Melissa Martinelli
Sprouts is really interesting because they have an onboarding in their innovation set that is unique. They have about 300 stores, seven distribution centers. It would be about 1,500 cases of each skew of three skews.

for us, but we would really need to prove ourselves on the shelf in order to get another purchase order. With any big retailer, you need to do that. But with this particular one in the innovation set, we're putting all of our resources behind making sure that we just fly off the shelf. And getting on the shelf of sprouts is one of the hardest things I've ever done. I pitched to them so many times and never heard anything. And getting into these retailers is like...

banging your head against the wall over and over and over again, no matter how great your product is. It is such a challenge. But more of a challenge is flying off the shelf. So our team is gearing up for that to make sure that we're successful. Our biggest revenue driver is Whole Foods. When we shifted from a direct consumer strategy to really supporting our retail accounts, we didn't invest.

any money into supporting our DTC anymore because we just didn't have it. And this year, as we look to fundraise, we would be putting some of that money into our DTC strategy, finally, because there is an opportunity for our product there, even though it's a liquid and it's heavy. Our customers are there and we just need to be able to put the dollars behind it to drive traffic there.

Anne McGinty (42:25.386)
Beyond sprouts and getting DTC up and running,
What's next?

Melissa Martinelli
The future of superfrau is very exciting because superfraud is so much more than just a drink. It is an opportunity for consumers to play a role in reducing food waste and fighting climate change. And while we have this soda using this ingredient, there are so many other things you can do with this ingredient. So I'm excited to see.

what other products we can roll out with it and how we can continue to share our message on what a powerful ingredient this is from a health perspective, but also how each individual can make a difference in reducing food waste and getting our planet a little healthier.

Anne McGinty
Well, I'm excited to see it out here on the West Coast because I know when our kids have soccer games and you just see all this Gatorade on the sidelines and.

you know, no offense to Gatorade, but all the colorings, all the fake colorings and all the added sugar. And I'm like, this is not actually healthy for my kids. So I would love to give them some Superfraud on the sidelines. And you know, even though it's still the beginning and you don't know where this is gonna go, a beverage company does not need to be that profitable in order to have a very lucrative exit. It's so fascinating to see the companies that end up getting acquired and...

Melissa Martinelli
We really built this with an exit strategy because it really does make sense from a supply chain perspective for a yogurt manufacturer to bring on a brand like ours. We're on a good path and, you know, anything can happen. I have no idea what tomorrow brings, but I'll be here ready to face it.

Anne McGinty
Yeah, I really wouldn't be surprised if I hear news of your company selling in three to five years time.

It feels like you're on a great trajectory, but I can hear some concern, or maybe it's just humbleness in your voice. What worries do you have?

Melissa Martinelli
I've been trying to fundraise a million dollars for over a year, and it happened like right at the time that the market tightened up. And everything changed, and what you typically could raise money for was like no longer the game. And what's interesting is we have all the numbers.

Melissa Martinelli (44:42.366)
We're just not so sexy. You know, I told you we're in like just over 100 stores. So our revenue is not insane. And for investors now, they need to see that we're at like a different point in our journey. We're just like too early.

Anne McGinty
What do you think they want to see?

Melissa Martinelli
Everybody says when you're at 3 million in revenue, come back and talk to us. And then they keep moving the goalposts.

Anne McGinty
You're not alone in this.
With the rise in interest rates, investors look at alternative investment options with lower risk profiles and company valuations can also go down. But this is temporary and I hope you can just write it out and look back at this moment later and see how much you made it through.

Melissa Martinelli
I'll keep you posted on how things go.

Anne McGinty
Please do. So what advice would you give to aspiring entrepreneurs who are looking to venture into the beverage world?

Melissa Martinelli
The beverage world is a cool space. There's a lot of cool characters, but gear up for a battle and gear up to have a really good time. And there's so much room for innovation. There's so much that's coming out that really isn't innovative. So if you have something truly innovative, stick it out because it will go against the odds and be successful. And if it doesn't, then you go

your business is not you does not define you. You are you and you can do so many different things with the education that you get to learn in this crazy business that we're in. Well, and better to try and fail than not try it all. 100%. I continue that mantra every day because it's all so much better than just having sat there and thought, oh, I should do that.

Anne McGinty
Okay, so a closing question here. What advice would you give to your younger self?

Melissa Martinelli
That's a great question. What advice would I give to myself? I think I may have just said it because I say it to myself a lot, which is your business is not you. For the longest time, when I started Superfrow in 2019, and someone asked what I did, I would still say I was an immigration lawyer and that I'm dabbling in something.

Melissa Martinelli (47:05.29)
And even until recently, I had defined myself by my previous career, and we're not our careers. Those are things that we do. And so I think the best advice I could give is that it's okay to try new things and that those things don't define you and that the most important thing is to try. I couldn't agree more.

Anne McGinty
Thank you so much for being here with us today.

Melissa Martinelli
Absolutely.

Anne McGinty
If you've made it this far, as always, thanks for being here. 
Today's key takeaways. 

Traveling overseas can expose you to new products and business ideas that you can bring back to your country of origin. Keep your eyes open and pay attention to concepts that could cross over.

Test your concept in a real marketplace and get as much consumer feedback as you can early in the process so that you can fully understand the customer's need. It is easier to navigate having that information in the beginning rather than backing up into it once you've started. 

Liquid whey is a diverse and nutritious ingredient that is also a problematic byproduct, and there is opportunity in there to be helpful and profitable at the same time.

Other players in the same field don't always need to be looked at as competitors. Flip your thinking and consider if there is a win-win way to work together. 

The beverage industry is a very competitive and crowded space, so placing an emphasis on brand recognition is important. 

If you are a woman-owned business, getting woman-owned certified can open up further opportunities, so look into it.

Distributors can charge anywhere from around 7 to 30% for a variety of services, but ultimately it is the brand's responsibility to make sure that the product is on the shelf, is well-faced and ordered when needed. This can add extra costs for merchandising, so keep it in mind. 

Getting and keeping your product in a retailer usually means that you'll be expected or required to run promotions, including demos, coupons and more. 

Be humble and learn what you are good at and what you are not good at, or at least what you have the capacity for, and hire others to fill the roles that you can't do as well yourself. 

Consider building an advisory board to fill in for all of your personal weaknesses. 

You are not your business and you are not your career. Those are things that you do. 

And finally, as trite as it is, it's better to try than to have never tried at all. 

That's all for today. If you enjoyed today's show, please rate and review and share it with a friend. I release episodes once a week, so come back and check it out. Have a great day.