It is a revolutionary platform that allows for quick creation of complex business logic and automation.
The last 18 months has been a focus on fundamentals: process, customer service, efficiency and product development. As such we have become much more lean and reduced our overhead and expenses significantly.
JAMBO SUPERFOODS - THC
The THC market has been rough on everyone, especially Jambo. Many companies who raised large sums are collapsing, and the ones who are surviving have raised huge sums and many of them are ‘dumping’ into the market, selling product for less than their COGS in interest in buying share hoping to outlast. This is not a viable strategy for Jambo; instead we opted to keep enough inventory so that we could remain stocked in a few key locations and use the turn on that capital to generate more products. Unfortunately our THC distributing partner went out of business, and during the chaos of that implosion our inventory, ~$80k was destroyed.
We then partnered with another ambitious upstart, Genesis Distribution who approached us, and whom I met in Colorado during my early days on the cannabis investor circuit. Jordan and I visited their facility in Sacramento and made a deal to partner with them. Six months later, they too succumbed to the California market: complete failure to get the requisite permits, launch or match their actions to their words.
We are left with no current THC presence in California. The market is very difficult to participate in; currently we are watching the market trying to see how we can leverage our IP and brand. If you have ideas I’d love to hear them.
JAMBO SUPERFOODS - CBD
Between the 1) Joe Rogan ‘kiss of death’ (where we got a huge influx of orders but lost our credit card processing == ~$100k and the Rogan deal), 2) massive influx in CBD brands and 3) the collapse of retail due to CCP virus, the business has shrunk by ~60% since 2019.
Despite these setbacks, we still have a great brand portfolio, considerable amount of inventory to sell, have a slew of new amazing products and have a high gross margin on each item.
We have continued to develop the brand launching several new
: Cinnamon, Mint, Tropical, Cola & Licorice. We now have drops in 8 flavors, with three strengths each (300mg, 900mg, 1500mg):
Making a total of 24 SKUs in the Drop Category. Our unique selling proposition is our ingredient composition, using only essential oils whereas our competitors use artificial or natural flavoring products. These essential oils themselves have beneficial therapeutic effects for the users.
With the new products we have new product photography we are using in our social media campaigns and being added to our website.
While most of our wholesale customers have gone out of business, we have retained some that make consistent orders. We do get inbound solicitations for retail business, but we do not have an outbound effort.
Last year our biggest issue was the instability of our website and merchant processing. These are now stable and the market is much less hostile. We are still doing a low but consistent amount of CBD web sales.
CBD marketing is difficult. Many of the conventional channels are closed, and there is a flood of ‘dumb money’ CBD brands that are over paying in the few channels that are available. We are currently focused on email marketing and working to develop some PPC top of funnel cold traffic. We have retained a PPC expert consultant to help us develop out and grow these efforts. Our goal is to be able to drive customers through purchased traffic to our landing pages that we A/B test. Our average order value with JSF is ~$90 and our cost of goods is ~25% leaving us with $67 in gross profit. If we can find a steady stream of traffic, we will work to drive the customer acquisition cost (CAC) down. We don’t think it unreasonable to get CAC to ~ $20, leaving a large ROI / net profit.
DIRT PERSONAL CARE
The Dirt has matured into a well defined brand, we have undertaken a huge packaging and branding update which has made our product even more eye catching and #instaworthy. We received a feature in a top 10 video from one of the world’s largest beauty bloggers ‘The Glam Life with Tati’ that drover tens of thousands of dollars in sales of our oil pulling mouthwash. With the world feeling the effect of the pandemic we hunkered down as a team and spent quarantine working diligently from home to tie up loose ends and tighten up the ship, building out better customer service, refining our admin processes to reduce labor costs and filling out the product line to give a better offering to the customer. While The Dirt was affected by the pandemic with many of our wholesale customers closing, and sales falling we have managed to increase our profit margins per product by staggering amounts. In 2021 we are well prepared to take advantage of a scaling opportunity I will go into further below.
When we developed the new flavor profiles we used with the Drops, we, when appropriate, mirrored them for the Dirt products. We have been steadily launching delicious new flavors:
Our plan is to have flavor homogeneity across the brand, so that if we have a Super Mint mouthwash, we also a Super Mint toothpaste, Breath Spray and Toothpowder. This year has been focused on launching the mouthwashes: 8 flavors, two sizes 8oz and 4oz. Next year we will launch the toothpowders, and then subsequently we will fill in the gaps with breath spray, etc.
The one area we saw a growth in sales was webstore income up 5% despite the pandemic. We are increasing our efforts in this area and are looking for triple digit growth here in 2021. The Dirt has been approached by
where they invest their capital to scale our new customer acquisition - taking the profit of the initial sale in lieu of equity. They have successfully scaled numerous brands from ~$1MM to ~$100MM such as ButcherBox, Thrive Market and Onnit amongst others in the ‘better for you’ space. They have moved from product category to category, picking a brand they think has the potential and then partnering. They take over the marketing, using their own in house technology to create a myriad of possible landing pages and ads and then use their capital to throw tons of traffic and the combinations and see which work. This has worked to great effect and has the potential to massively scale our business. This is perfect, as we’ve spent the last 2 years preparing for this moment after we scaled too quickly in 2018.
We have passed their diligence process and just received their final contract and are currently reviewing it.
These guys are the real deal and we have massive potential here! 🚀
Wholesale generally is a lousy business model (late payments, finicky customers, closing down to pandemic) but we have a few awesome partners that place large and consistent orders. We do have inbound leads, but do not have an active outbound effort. Passively we added 41 stores since April 2020.
MANUFACTURING & FULFILLMENT
The main focus for our team has been becoming more efficient and generating less waste of raw materials and labor hours. We have dialed in and optimized our recipes, procedures and purchasing procedures. We have driven COGS down on average ~50% on newly placed orders by doing a more thorough job shopping the bid as well as ordering larger quantities of product to receive the benefits of scale. This has had the effect of lowering COGS tremendously while simultaneously demanding most of our cash. Our current goal is to generate and have ~ $2M of ‘retail value’ of inventory in a fulfillment center before our facility lease expires in October 2021. This will give us continuity of operations and destress the move out of our California facility.
Our five year lease expires in October providing us the opportunity to reassess our situation. We currently have 5500 sqft of space, split almost 50/50 production/office. However due to our relentless focus on operations, we are currently only using 10% of the office space. Our rent is $5500 + CAM + Utilities resulting in a monthly expenditure of about $8,000.
Santa Rosa is not ideal as it is not in flow with the major transportation network of the United States, nor is California a manufacturing friendly state. We originally located in Santa Rosa due to Cannabis zoning requirements, and this has made the entire venture more complex and expensive.
Our current plan is to exit California and relocate to Las Vegas, NV. Not only is the state more business friendly with less taxes, but we have found production locations at ~$8/sqft whereas we are paying ~$13/sqft. Further we can get something that is primarily warehouse; if we preserve our manufacturing footprint at ~2500 sqft and shave 2000 sqft of office along with the heating and cooling expense. I calculate we can lower our monthly expenditure to between $3-4,000 providing significant savings. I am flying to Vegas in July to look at properties such as this:
We would incur the cost of the move as well as a buildout that I estimate to be no more than $50,000, paying for itself in the first year.
The major downside is the talent we have in Santa Rosa. I am talking with the production team next month about relocating with the company.
We have begun to transition our fulfillment from our Santa Rosa facility to
. We started with them fulfilling the Dirt retail business in November of 2020 and have been very pleased and are now giving them the wholesale business and then will transition Jambo to them. This is allowing our production team to focus more on where they can provide unique value - the efficient production of our products. We will retain the capability to ship orders and will still ship the finished product out to the 3PL.
Manufacturing has been one of our biggest focuses for 2020. Processes have been smoothed out, recipes have been refined, and products better sourced. Our labor efficiency is increased, and we have reduced our overhead. For example in 2018 we had a production manager, fulfillment manager and two assistant production managers. Since then we have reduced our overhead to one ‘working manager’ who spends about 50% of her time doing administrative and managerial tasks and spends the other time working. This has saved us over $100,000 per year, while simultaneously increasing our output.
to provide us on demand labor. Wonolo, despite founding in California, has withdrawn from the market. CA has continuously increased the minimum wage and has been handing out so much in free money / unemployment / etc that we have not been able to recruit new workers. We hope to address these, and many other issues through the aforementioned relocation.
I have spent a lot of effort in improving our supply chain, getting better at predicting what we need as well as getting better pricing. We now are sourcing many of our items from the ‘the source’ instead of paying a middleman. For example, our Bentonite Clay, which is in most of our oral care products used to cost us $5.20/kg. By finding the actual quarry where the clay is harvested we have reduced our cost to $1.46/kg, a 72% decrease.
While revenues have been in decline, this is primarily due to a focus on operations and business fundamentals - a desire to have these optimized before we go through another surge of growth. While one is never ‘done’, our focus is beginning to move back to growth. With our COGS and overhead so reduced, future revenues will generate large profits which can then be reinvested into growth and paid out to partners.
Relocating out of CA will further increase our profitability and the service level we provide to our customers. We are excited to focus once again on scaling the business.
My next project is to complete the company’s taxes and provide to you your K1, as well as the company’s financials and analysis. Thank you for your patience and continued support.