Guayakí Yerba Mate: David Karr and Chris Mann

In the mid-1990’s most Americans had probably never even heard of yerba mate, but when David Karr and Chris Mann were first introduced to the South American drink, they were hooked. Together with three other friends, they decided to launch a company that would bring mate to the American market. Based in San Luis Obispo, California, the co-founders of Guayakí Yerba Mate spent years living in a van and driving all over the country, brewing up free samples for consumers, and convincing natural food stores to sell their product. It would take almost 15 years of grinding away before the company turned a significant profit, but the founders were powered by a mission to do business in a way that supports communities and the environment. Today, Guayakí has annual revenue of over $100 million, and their canned and bottled beverages are available all across the U. S. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

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• 0:46Guy Raz?

  build the prototype, analyze the market, maybe even come up with the idea, what separates the people who actually build something from everyone else? I don't have a clean answer yet, so I've been sitting with it with Claude. There's hope in hard questions. Ask yours at claude.ai/hibt. We get support from U.S. Bank. A question I love asking founders. What's the one decision you almost didn't make? The one that changed everything? Because it's never the obvious stuff. It's never, I decided to start a company. It's the small, boring, Tuesday afternoon decision you barely remember making until you realize it's the reason everything after it either worked or didn't.

• 1:32Guy Raz?

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• 2:14Guy Raz?

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• 3:40Guy Raz?

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• 4:23Guy Raz?

  And it reminds me a little bit of the founders I talked to on this show, because the best ones obsess over things their customers will never see. Tiny details, invisible improvements, relentless iteration. And not because anyone's watching, but because it makes the product better. That's what the mobile brand does. It engineers fuel the same way great founders engineer their products. Mobile Supreme Plus Premium Gas helps keep engines three times cleaner, which can mean better performance and improved gas mileage. It's for people who care about what's under the hood, even if they never see it. Three times cleaner compared to mobile regular gas in port fuel-injected engines. Actual results may vary.

• 5:07Guy Raz?

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• 5:13Guy Raz?

  You are on the road, setting up demos at any natural food store and trying to get people to try it, right? That's a lot of work.

• 5:21Speaker 01

  You're right. It was a ton of work, and most people would never do that. They wouldn't live in vehicles for all those years. They wouldn't get along, their relationships. I mean, all those things. But the mate was always just so much about bringing us together and bigger than any one of us. We actually had a lot of fun. I mean, it was a blast.

• 5:45Guy Raz?

  Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 5:56Guy Raz?

  I'm Guy Raz, and on the show today, how five surfers in California bonded over a drink most people didn't even know existed, and how they built a $100 million company to share it with the world.

• 6:14Guy Raz?

  Building a brand is really hard, especially when the product is virtually unknown to your potential consumer base. This is why you don't see Americans spreading marmite on their butter toast in the morning, even though millions of British people eat it every day. It would take decades to convert Americans into marmite consumers. Salty, bitter, brown, yeasty sludge is an acquired taste. So is a bitter, musty beverage called mate. Now, if you're not familiar with it, mate is the most popular non-alcoholic beverage in parts of South America. It's made by steeping the dried leaves from a yerba mate tree in water, and it's usually served hot in a hollowed-out gourd.

• 6:58Guy Raz?

  In Argentina and Brazil, people usually drink it through a metal straw. Mate has a few organic compounds that some people say make them more energetic or alert, a little like coffee, but without the edge. Anyway, back in the mid-1990s, a group of friends in San Luis Obispo, California, were introduced to mate by another friend from Argentina. And within a short period of time, they founded a mate company they called Guayaki. Now, what they didn't account for was how difficult it would be to convince people to drink mate. Let's just say it doesn't go down easy. It would take them almost 15 years of grinding away before the company turned a profit.

• 7:41Guy Raz?

  And much of those 15 years was spent on the road, in a camper van, going from festival to festival, handing out free samples. In fact, the co-founders estimate they've given away more than 5 million samples of mate. A few years ago, they made a decision that would be both incredibly hard and incredibly smart. And that decision was to build their own distribution network. And how they did it, well, we'll get there. Today, Guayaki yerba mate generates more than $100 million in annual revenue. And their canned and bottled drinks are available all across the United States. You're going to hear from two of the five co-founders in this episode, Chris Mann and David Karr.

• 8:24Guy Raz?

  David grew up in the hills between Santa Cruz and Silicon Valley. He spent a lot of time, as a kid, outside in the redwood forests. He ended up going to college at Cal Poly San Luis Obispo in 1989, where he took business classes. But pretty quickly after he got there, he figured out that capitalism didn't really appeal to him. So instead, he decided to switch to Cal Poly's foreign language department, which took him to study abroad in France.

• 8:50Speaker 01

  I really liked the challenge of learning a language. And I've always been like a people and a connector person. And I lived with a French family, French grandparents, really. And so they didn't speak any English.

• 9:01Guy Raz?

  Wow.

• 9:02Speaker 01

  And after like three to four months, it finally started clicking. Like, I could understand what they were saying and I could speak a bit. And so I really liked that challenge. And then I also loved the area where I was living and I loved the cuisine and I loved the attention to like, there was just a different pace of life. And I was really drawn to like, sitting down and having a meal for two hours and talking and sharing a glass of wine, not to get drunk, but just to like, socialize. And so it was, for me, it was a huge like, awakening of like, a whole different way of like, living.

• 9:33Guy Raz?

  Yeah.

• 9:34Speaker 01

  Based on what I had kind of grown up and experienced just on the West Coast.

• 9:37Guy Raz?

  All right. So you come back to California to finish up your degree. You graduated in 1996, but I guess that was sort of two or three years after, right? Because you got to school in 1990.

• 9:50Speaker 01

  I started in 89 and graduated in 95. So I had two years abroad. And so from, because my experience in France was so good, I ended up going to another language school in Germany for a few months. But then I moved to Spain and then again, I lived with another Spanish family. Actually, it was two families, two nine-person families. So I was like in this pack of like, 18 Spanish people.

• 10:11Guy Raz?

  Wow.

• 10:12Speaker 01

  And they didn't speak English at all. And so my Spanish actually became the best, even better than French.

• 10:16Guy Raz?

  Yeah.

• 10:17Speaker 01

  And so I'm just sharing that because when I got back and when I met Alex at the restaurant later on, I did have a base of Spanish, like enough to hang out and converse. And so I could basically, Alex could speak to me in his maternal tongue and be himself and express himself in his own humor and I got it.

• 10:33Guy Raz?

  All right. So you came back, basically with two and a half languages under your belt.

• 10:39Speaker 01

  Yeah.

• 10:39Guy Raz?

  You're back in San Luis Obispo. And I guess you met this guy named Alex Pryor, Alejandro Pryor. Who is, who is Alex?

• 10:48Speaker 01

  He was an exchange student in soil science.

• 10:50Guy Raz?

  From Argentina?

• 10:51Speaker 01

  From Buenos Aires, Argentina, yeah. And we met both after we finished. Like, I graduated in 95 and so did he. And he was working at a restaurant locally and that's where we met.

• 11:04Guy Raz?

  You guys just struck up a conversation in Spanish?

• 11:07Speaker 01

  Sort of, not really. He ended up spilling food on my girlfriend at the time. And so we ended up chatting it up, you know, because it was like, oh my God. And then he liked us and he invited us out to have a meal, like a traditional barbecue, which they call a parisha at his place. He was living in a, in a mobile home, like a little trailer on a fairly large property. And he was doing organic farming studies for the landowner. So we came out there, had a meal. And then after the meal is when sort of the moment happened, you know, when he passed around the traditional mate gourd.

• 11:46Guy Raz?

  He finished the meal and he passes around this drink.

• 11:50Speaker 01

  Yes.

• 11:50Guy Raz?

  Called mate.

• 11:52Speaker 01

  Yeah.

• 11:52Guy Raz?

  And, and tell me what, what was, what do you remember about, about how he sort of presented it to you?

• 11:57Speaker 01

  Well, I think it's just sort of a normal thing to do after you have a meal. If you want to connect with someone and you want to have a moment, you pass around a mate gourd.

• 12:05Guy Raz?

  A gourd. It's literally a gourd, a dried gourd, right?

• 12:09Speaker 01

  It's really like, there's all different kinds of gourds. There's hollowed out like calabas, like squash gourds. There's ceramic gourds, there's metal gourds. They're basically a, a container. And you put a metal straw into it with little slits on it that create a little filter at the bottom. So when you put this straw filter in there and you suck through it, the small leaves and particles don't come through the little slits and you just get the liquid.

• 12:36Guy Raz?

  And were you thinking, this is interesting? Like what?

• 12:39Speaker 01

  Yeah. Well, well, that was the moment, right? People ask you like, what's that moment? And the aha moment? That was the moment because I had suffered in my life from hay fever, straight up.

• 12:52Speaker 01

  And I had taken Sudafed and Benadryl like drugs to just be able to like stop have my nose running. I just suffered a lot. I had humidifiers in my room growing up and I kind of cut all the drugs cold turkey because they just made me feel so bad. And the only thing that ever really made me feel great was like a lot of exercise. So I would, if I was surfing or mountain biking or doing like a two hour Ashtanga yoga, which is a bit more of a vigorous yoga, something like that, I could breathe pretty well. And it took an investment of time to do that. Well, that day when he passed around the gourd, within like 10 or 15 minutes, I all of a sudden, my nose cleared up, not completely, but like I was breathing and I was like, what is this stuff? Like, how,

• 13:37Speaker 01

  how come I'm?

• 13:38Guy Raz?

  You'd never heard of it before?

• 13:39Speaker 01

  Never heard of it, no.

• 13:41Guy Raz?

  I mean, the description, you say you're like, sort of saying, I felt amazing, right? But it wasn't like a high, right? It wasn't like taking mushrooms or something. It was a, describe how you like felt besides the fact that you felt like your nose cleared up. What else did you feel?

• 13:59Speaker 01

  Well, I felt the energy and the clarity of mind, too. Like, because the mate is a vasio and bronchio dilator, so it gets your system flowing. So not only am I breathing now, then you have more energy and you have more clarity of mind. So those were sort of a byproduct or an effect of having a system that's flowing better.

• 14:20Guy Raz?

  All right. So you have this experience with it. And I want to be clear about this. Not everybody is going to have that reaction. And there's, this is not a science show. We don't have the data. But you clearly, it was like you loved it. There was something about it. So did you say to Alex, hey, can I get more of this stuff? Like, I want to keep drinking this tea?

• 14:41Speaker 01

  I did. And we, he started sharing more and more gourds with me and we would hang out. We liked each other, right? We had a real chemistry. Like, you know, we're passing around other green things at that time, too. And this was like, okay, everyone who started drinking this was like, getting the balancing effects from it. Like, we were all surfers and spending a lot of time, you know, driving along the Coastline staring at the waves, trying to find the best one parking, checking it, driving your car again, looking for that. So you're, so we all started drinking it and you know, an hour into drinking the gourd. And then we'd go paddle out and it was like we'd all, everyone started saying they had the best sessions, like everything started clicking. You know, you'd have, you'd be doing yoga on the beach, drinking your mate, get in. And so it just really like landed so well.

• 15:25Speaker 01

  And then people started quitting coffee and that's what kind of was like, huh? This is really interesting.

• 15:30Guy Raz?

  I guess this is a moment where we should pause and talk about mate for a minute because when I was doing research on this episode, I was amazed to learn that mate is like, it's not surprising, it's been around for hundreds and hundreds of years, it's been around for longer, but it was sort of first consumed by, you know, indigenous tribes in what is now Paraguay and around Argentina and in those areas. It's been consumed for like 500 years, but really never really made it beyond Argentina and Paraguay and parts of Brazil, right? Like what, so when you first had it, did you ask him, you're like, how is it that this thing is like only in this tiny part of the world?

• 16:13Speaker 01

  I did, and the story that I've heard over and over is it was actually expanding like tea and coffee. And it was kind of, it kind of went all the way up into Peru and different places. And, and then there was a war that happened between Paraguay, Argentina and Brazil. And the trade routes broke down. And so then yerba mate never kept trading and going further away. It kind of stayed confined to that area, whereas tea and coffee continued to expand around the world with their trade routes.

• 16:44Guy Raz?

  And I guess you could describe mate as sort of having elements of coffee and tea, right? It's got, it's a leaf, it's a dried leaf, it's brewed like tea. It has some of the same chemical properties of tea, but also has caffeine like coffee.

• 17:01Speaker 01

  Yeah, I mean, it was used more like our culture uses coffee than tea.

• 17:09Speaker 01

  People used mate in the morning to wake up and they brewed it strong. And even as we commercialized it, the first people to ever really get into mate were not so much tea drinkers, because people would have like generally a cup of tea or a lighter cup of tea, whereas they would brew the yerba mate in a French press or a coffee maker and make a strong cup of mate. So it was very much like you could quit coffee, drinking mate.

• 17:35Guy Raz?

  Yeah.

• 17:35Speaker 01

  However, if you look at the chemical structure, and this was always very fascinating, you know, coffee was really had a lot of caffeine and so does mate. Tea had a lot of teofylline and then chocolate had theobromine. And yerba mate has all three. And that was very much what I attributed sort of the unique sensation that people feel from yerba mate, like, why is it so different than coffee or tea? Well, it's the unique combination of these alkaloids in the package of something that has pretty much the nutritional profile of like a wheatgrass.

• 18:04Guy Raz?

  Got it. Okay. From what I understand, like, most mate is commercially grown and like it's grown on areas that where there was rainforest. Rainforest is just like cut down to just plant these mate trees. And they can produce a lot of mate faster. But mate traditionally was grown in shade. And mate is not like tea, which is grown, it's like a low growing leaf, right? It grows close to the ground. Mate grows on trees, right? It's a leaf from a tree.

• 18:35Speaker 01

  I mean, tea, like mate, they kind of look like bushes, right? So they're, they're both cultivated similarly for the ease of harvest. If you were to find a mate tree in the wild, it would grow up like 80 to 100 feet tall and maybe be like 12 to 18 inches in diameter for bigger trees. But that is difficult to harvest generally like for the mass amounts of production. They prune the trees down and they make them in more like bonsai trees, like the size of an orange tree and get on step ladders and trim them like a tea bush. They're probably bigger than tea bushes, but similar in size or shape.

• 19:11Guy Raz?

  So at what point did the idea come into your head or into Alex's head to maybe turn mate into a business? I mean, you're, you're like, what do you, what was the conversation you remember?

• 19:23Speaker 01

  Well, we were becoming bros, right? We were hanging out a lot.

• 19:26Guy Raz?

  You guys were bros.

• 19:27Speaker 01

  We were bros. We were surfing and doing taekwondo and drinking mate. And at one point, he was asking me for advice and we were talking and he said to me, he's like, "The door is always open." I'm like, "What do you mean?" He's like, "We could do this together." And at that point, he was putting half pounds of mate together in his trailer with a tin tie bag and selling it at one store in San Luis Obispo. So he had it in one co-op store and he'd make a couple cases and sell it. So I started doing that with him, just helping him, actually. I wasn't even joined with him yet, but I just would hang out and talk with him and pour mate into the bag. That's what we were doing. I was kind of just volunteering my time.

• 20:01Guy Raz?

  And would they call it, were they calling it like Alex's mate or was there a name or?

• 20:05Speaker 01

  It was called Guayaquil from the very beginning.

• 20:07Guy Raz?

  It was called Guayaquil? Wow. Tell me about that name.

• 20:10Speaker 01

  Well, the name came from our, we, all of our mate originally came from Paraguay, from an area of rainforest that was part of like an experimental project to reforest mate in its natural habitat. And Alex, through his dad, who knew the landowner, when he got this yerba mate in his hand and started drinking it, he was also profoundly affected. He was like, "Man, this stuff tastes really good. It's nothing like the yerba mate he grew up drinking." Because all of them, all just drank commercial sun grown mate with chemicals. That's all you can get. And the name of the reserve where the mate was coming from was about 25,000 acres, was called Guayaquil. And so then Alex just used the same name and we just threw yerba in the sack and that was it.

• 20:55Guy Raz?

  And this mate was different because it was essentially grown organically?

• 20:58Speaker 01

  Organically in the shade, smooth tasting, better flavor, all of it. And so he was like psyched on it. And he was, it was also, I think, if he shared it with people, they liked the taste better. Because if you drink the Argentine stuff that's sun grown, it's really like almost offensive unless you grew up drinking it. It's pretty bad tasting. And for me, that was when my business brain clicked back in. I was kind of like anti corporate. Like, I don't want to be part of something that's not good for the world. And when I learned that this yerba mate could be grown in its natural environment and produced by small farmers and indigenous people, all of it just sort of added up to me. I'm like, wow. And like, the more we could scale this and return

• 21:39Speaker 01

  like destroyed lands back to forest would be great for the world. I saw like the power of this product to drive real change. And that's what, that's what got me in.

• 21:50Guy Raz?

  All right, I'm gonna come back to you, David, in just a moment. But I want to turn to Chris for a little bit. Because, Chris, I know that you grew up in Southern California. And I think like David, you also loved the outdoors.

• 22:01Speaker 02

  Yeah.

• 22:02Guy Raz?

  I read you were a high school athlete and a super smart kid. I know you studied economics at Harvard. And then you went into finance after college, right? But from what I understand, you just were not happy with the path you were on. So you sort of quit your job, which is around the time you guys met. Tell me about that. Where were you when David and Alex met? What were you up to?

• 22:25Speaker 02

  So I, at the time, was living in the Bay Area. My wife was getting a degree, a master's degree in holistic health. And I was trying to figure out my next, what I wanted to do. I was waiting tables basically just to make ends meet, pay rent. But I had a lot of free time. And both my wife and I, we were just diving into like, all kinds of reading and learning and a lot of eastern thought. And just really, I think, grappling with like, who are we as people? And what do we want to do on this planet? And I think the more I moved away from conventional mentality, the more it allowed fertile soil for these other seeds to grow.

• 23:03Guy Raz?

  So, all right. So you're going through this kind of personal transformation. How did you end up in San Luis Obispo, which is on the central coast of California?

• 23:13Speaker 02

  So two of my high school friends were very passionate about macrobiotics. And we're going to Cal Poly San Luis Obispo. And as part of their senior project, they were opening a vegan restaurant in San Luis. And they were living in a house that they had converted the whole front yard into a living garden and into really like a food forest, where you had mixed trees with different herbs and shrubs and vegetables. Wasn't just like planting things in a line. So it was really kind of an early version of permaculture. And so I lived there. And the way I felt eating the food...

• 23:51Speaker 02

  Changed my body. And then on top of that, we were connecting with all these local farmers. And so seeing the connection between the food we eat, how it impacts the land, how it impacts the community, how it impacts the health of the body. And it was like, wow, we really need to focus on building something here.

• 24:07Guy Raz?

  All right. So you're working at the restaurant, helping your friends out. How did you meet David Karr and Alex?

• 24:13Speaker 02

  Yeah, so I met both David and Alex through the restaurant. We officially opened, I think, in mid 1995. And around that same time, Alex was living on a farm, and that farm was where we were sourcing our subtropical fruits for what we called our forager bar. So we had basically a giant salad bar, but it was all kinds of different fruits and vegetables, many of which were locally foraged.

• 24:37Guy Raz?

  Wow.

• 24:37Speaker 02

  So Alex came in, he knew about the restaurant, and he thought it would be a great place to sell yerba mate. And shortly thereafter, David became a customer. And we met and really hit it off. And David is such an incredible person. I mean, the moment you meet him, you really kind of light up. And at one point, he was like, oh, you should come by my place and we can play some music or something. I was like, oh, that sounds good. When's a good time? And he was like, anytime. I was like, wow, really? Anytime? And he's like, yeah. And when I did go to his house, that's when we first shared mate out of the gourd. And that's when it really got me. And here is something where it's

• 25:18Speaker 02

  very intimate, you're sharing. And so you naturally start having these incredible conversations and dreaming about the future. And so so much of how I think about David is just so tied to that.

• 25:30Guy Raz?

  All right. So you guys start to form a friendship. And David, I mean, you and Alex start to really explore turning this into a business. And I guess at a certain point, you wanted to formalize it. You were like, let's File an LLC and set up a company properly. Tell me about how you even started that process.

• 25:51Speaker 01

  Well, that's even a more funny time because the way we first sort of ceremoniously celebrated our relationship was he gave me a silver wampa, which is a bullhorn that's silver plated on top in a drinking vessel for yerba mate. So he gave me one of those as like a symbol of our friendship and connection.

• 26:12Guy Raz?

  Alex did.

• 26:13Speaker 01

  Alex did, and that's, that was what I had for a whole year. That was the only thing I, we went on, but we actually had to go like get some money. That wasn't enough, I think, for the bankers. So we, we did come up with agreements, but you know, that was something you gave to someone when you got married or a really special time in your life. And so for him, that was the most important thing was symbolizing our connection.

• 26:36Guy Raz?

  All right. So David, how did you go about, I mean, presumably you needed money to import the mate. You needed money to buy the bags that you would then put the mate in and then labels to label them. I can't imagine it was that much money that you needed to get this started, right? Cause you were really selling to local shops and.

• 26:57Speaker 01

  Yeah, we, we got a $50,000 bank loan locally.

• 27:00Guy Raz?

  How did you get, how did you get a $50,000 bank loan?

• 27:04Speaker 01

  Well, that's also kind of the funny thing about a small town relationships, right? Because Alex worked at this Italian restaurant and the owners were friends with like the local bank and they made an introduction and then Alex and I went in there and we told them about this whole project. I don't think they got it at all.

• 27:20Guy Raz?

  Yeah.

• 27:21Speaker 01

  But they liked us enough and they loaned us the money.

• 27:24Guy Raz?

  Wow. What kind of collateral did you have? Must have.

• 27:27Speaker 01

  Nothing. No collateral. I mean, we had some loose yerba mate, but you know, that's what they, first bank, San Luis Obispo, that's what they did. They wanted to support local business. And I think a lot in a small town comes down to relationship and who you know and do you trust them?

• 27:41Speaker 02

  We had to sign personal guarantees, but there was no, nothing to guarantee.

• 27:45Guy Raz?

  Yeah. I mean, that's kind of a crazy loan to give. I mean, you know, it's an unknown product. There's no market for it. You basically are going. Them saying, look, we're going to create a market in the United States. We're going to educate people about this product. And if I'm a banker, I'd be like, I'd be kind of skeptical back then.

• 28:03Speaker 02

  Well, part of it too was it was an SBA loan. And so the SBA guarantees, you know, I think 90% of the loan. And so it's really kind of like how it's designed to work.

• 28:14Guy Raz?

  Yeah.

• 28:14Speaker 02

  But with all the banking consolidation, that's changed so much. Now it's all about the numbers and stats and everything else.

• 28:20Guy Raz?

  Right. Because in the mid 90s, there were still a lot more independent banks than there are now.

• 28:25Speaker 02

  Yeah. If I, if I recall, the president of the bank was named Reese Davies. And he said, you guys remind me of the San Luis sourdough boys. And that was, and San Luis sourdough had been a big success locally. And so that was it.

• 28:39Guy Raz?

  That's amazing. That's amazing.

• 28:41Speaker 01

  And there was another really big element to it. I mean, I think we had nine personal credit cards maxed. Chris and my brother, Stephen and myself, we got, you remember that time? That was that time in the mid 90s. They just started sending everyone credit card offers.

• 28:56Guy Raz?

  Yep.

• 28:56Speaker 01

  So we just like said yes to them all. And we probably, you know, probably had another couple hundred K just in credit cards on top of the bank loans that we did to like fund the business at that time.

• 29:07Guy Raz?

  But initially, when you guys got together to start this, David, what do you remember about the ambition? Were you like, we're going to make this the next coffee. This is going to be the next massive beverage in the United States. Or was it more like, yeah, let's just see if we can get people to buy it in San Luis Obispo.

• 29:26Speaker 02

  Yeah, no, it was always a really big vision. And it's a little humbling to even talk, talk about it now. I mean, I remember convincing my brother to drop out of university in Chico.

• 29:35Guy Raz?

  Is your brother Stephen?

• 29:36Speaker 02

  Yeah, to do what he did.

• 29:38Guy Raz?

  He dropped out of university.

• 29:39Speaker 02

  He was almost done. He had like a half a year left, but he was studying graphic design. I was like, bro, we need you.

• 29:44Speaker 01

  And he was living in Europe, kind of following in my footsteps for six months. And I went out and told him everything that was going on with Alex and shared Maté with him and left him with a gourd. And then when he got back, he was in.

• 29:56Guy Raz?

  You needed a graphic designer for your logo and for your look.

• 29:59Speaker 01

  Everything, because we were like packaging and products and we were doing all that. We couldn't really afford anyone and none of us were taking a salary. So we just needed sweat equity in there. And, you know, I remember telling him, I was like, we're going to be a billion dollar business in five years. You know, like I was so, so jacked on this product.

• 30:16Guy Raz?

  Yeah.

• 30:16Speaker 01

  Like, I didn't know anything. I was naive. I just thought it would spread out a lot faster. I didn't know anything about distribution or sales or lead time, nothing. And I was just like, human nature loves this stuff and it's just going to be big.

• 30:29Guy Raz?

  When we come back in just a moment, how the Guayaki team spreads the word about Yerba Mate to people who have never heard of it before, and why their first big piece of media attention almost kills the company. Stay with us. I'm Guy Raz and you're listening to How I Built This.

• 30:49Guy Raz?

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• 31:34Guy Raz?

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• 31:56Guy Raz?

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• 32:40Guy Raz?

  a new expert-created business guide in your hands today. It's called Aligning for the Agentic Era: How AI is Changing Everyday Work. And right now, it's yours, absolutely free. Inside, you'll discover how AI could reshape work across your entire organization, and how to position your business to prosper from it. If your revenues are at least in the seven figures, get NetSuite's free business guide, Aligning for the Agentic Era: How AI is Changing Everyday Work, at netsuite.com/built. The guide is free to you at netsuite.com/built. netsuite.com/built.

• 33:21Speaker 03

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• 34:06Speaker 04

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• 34:29Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's the mid 1990s and Guayaquil is starting to take shape as a company. Chris has now joined David and Alex, and so has David's brother, Stephen. That accounts for four of the five founding semias or seeds of Guayaquil. The fifth founder goes by Don Miguel, although his real name is Michael Newton.

• 34:52Speaker 01

  Michael Newton and I were like, became college buddies. He was also studying business, but we were just like hanging out, surfing, and playing music together, just bros. But like, he was actually the very first one who started helping out. Alex and I, even before Stephen and Chris, because he actually ended up kind of joining as a quote unquote intern and helping drive up like the first eight tons of yerba mate from Los Angeles to Slow Town in the U-Haul that was rented and like, you know, having to like move all eight tons himself twice. Because I mean, the classic story of Don Miguel, he's a workhorse stallion, always positive, you know, and so, you know, he was working with us early on.

• 35:33Guy Raz?

  And how did you guys decide who would do what? Did you say, okay, you're going to be the CEO, you're going to be the CMO, you're going to be this. What do you remember about those decisions?

• 35:44Speaker 02

  Well, it might be a moment to talk about Alex's transition, David.

• 35:47Speaker 01

  Yeah, because essentially, like I said, we had a partnership there. And when he was on a sourcing trip pretty early on, might have been like in 90, what, 97?

• 35:58Guy Raz?

  Mm hmm. Back to Argentina.

• 36:00Speaker 01

  Yeah, because he's living in, you know, the central coast, right? But he goes back on the sourcing trip and he meets his future wife, Florencia, and things changed for him, too. And so now, he's kind of like, hey, we're sharing a gourd. It's a very emotional, charged moment. So he basically says, give me 10 or 20% of the business and I'll send you the yerba. And I'm like, ugh.

• 36:23Guy Raz?

  And just to be clear, he was telling you, Alex was saying, I'm moving back to Argentina.

• 36:27Speaker 01

  Yeah.

• 36:28Guy Raz?

  I can't run this business from here, but I can send you the mate.

• 36:32Speaker 01

  Yep, and he did.

• 36:33Guy Raz?

  Yeah, but he was the guy.

• 36:35Speaker 01

  Yeah.

• 36:35Guy Raz?

  He was the connection to mate. He was the Argentine.

• 36:39Speaker 01

  And continues to be my soul brother. I mean, later introduces me to my wife. I mean, he's my, he's like my soul bro. And so of course, what do you do? You love your, your friends and.

• 36:47Guy Raz?

  Yeah.

• 36:47Speaker 01

  For me, I never wanted to be just the guy, you know, I liked doing things with people and partnerships and friends. And so that was when we shifted up the equity structure and then we distributed the rest of the equity to the four of us based on sort of responsibility that we had.

• 37:02Guy Raz?

  So Alex moved to back to Argentina and that's it. He was sort of out of the picture on day to day operations.

• 37:08Speaker 01

  For the next, you know, three to four years, it was more, he took another job as well. It didn't require that much of his time until we started growing.

• 37:17Guy Raz?

  Right.

• 37:18Speaker 02

  It was one of those things that like, it wasn't the right time for it, but ultimately it never would have worked had he not moved down there.

• 37:24Guy Raz?

  Yeah. This is a challenging business that you started in 1997, really 1996, because you had to introduce a product to a market that 99.9% of people had never heard of. You had to convince them to try it and then you had to hope that they would experience the benefits of it enough to turn this into a sustainable business. But it's one of those products that you can't just like sell to a, a natural food store and hope that they're going to sell it off the shelves. It's the kind of product that you have to demo in a store, give it to people, let them try it. So presumably you're doing that in San Luis Obispo at this time.

• 38:07Speaker 01

  Yeah. So that kind of goes back to the original question of sort of how the roles and responsibilities broke out because now there's five of us. And Alex is now in South America sending us yerba and Chris is running the business, holding it all together. Domigal and Steven and I, the three of us, get on the road as like full-time sebadores.

• 38:26Guy Raz?

  And sebadores, just to clarify, these are, it's like a barista of mate.

• 38:31Speaker 01

  Yeah, it's a traditional term for someone who shares and who prepares and shares the yerba. So we are sebadores.

• 38:38Guy Raz?

  Okay.

• 38:38Speaker 01

  And we, we started doing that in Slow Town in San Luis Obispo at the farmer's market.

• 38:43Guy Raz?

  And you were just brewing it tradition, just normally, no sugar, no?

• 38:46Speaker 01

  Well, yes, exactly. That was the thing, right? We had a very small percentage of people who could actually drink it because we were so hyped on our own Kool-Aid, right? We brewed it so strong in those percolators, those coffee percolators that would drip for like half an hour and then serve it to people at the market. And they would drink like this cowboy mate, like straight and dark and strong.

• 39:06Guy Raz?

  Like the espresso.

• 39:07Speaker 01

  Oh, yeah.

• 39:08Guy Raz?

  Super strong.

• 39:09Speaker 01

  Strong, right? And so people felt it. And some people were like, uh, not for me. And they'd walk away, like 80% of the people, like they'd smell it. I can't do this or too strong or too bitter, too much. But those who did were just like, hell yeah, this was amazing. And so we kind of got that, uh, that whole feeling of it. We got, we took that show on the road. Steven and I, my bro went into the north. Domigal went south, wherever he was from, Long Beach, into SoCal. Steven and I would go together. We were living in my VW bus.

• 39:35Guy Raz?

  Okay.

• 39:36Speaker 01

  And Domigal had his truck and he was more on his own. But then the three of us would come together for certain events, like, uh, like some of the first festivals that were being started on the West Coast. This is back when festival culture really hadn't started yet.

• 39:48Guy Raz?

  What kinds of festivals?

• 39:49Speaker 01

  Like, like back in the day, like Health and Harmony was like the first one on the West Coast. And then there was Coachella and Bonnaroo. And then there's all these like-

• 39:59Speaker 02

  Trinity Tribal Stop, Reggae on the River.

• 40:02Guy Raz?

  So music was your, that was the tribe that you were going for, the people going to the festivals?

• 40:07Speaker 01

  It was kind of what we were into.

• 40:08Guy Raz?

  Yeah.

• 40:09Speaker 01

  And if you're going to go to a festival, it was where younger people were and people wanted to stay up late to catch the music and they needed the energy because they were dancing. It just fit right in.

• 40:19Guy Raz?

  Yeah.

• 40:20Speaker 01

  And then Stephen and I, after going all the way north and going all the south, ended up in LA. And we're like, oh, my God, this is great down here. Everyone was like so into into health and wellness. And so we just like planted ourselves in Topanga for like a year. But there was something that happened when we were down in LA. That's when soy milk started getting popular.

• 40:38Guy Raz?

  Yeah.

• 40:38Speaker 01

  So we started putting honey and soy milk in the mate and making mate lattes. And then like the percentage of like maybe 15, 20% of the people actually trying and liking it went up to like 50 or more. People are like, oh, this is great. I can drink it instead of my coffee now. I can drink a mate latte.

• 40:56Guy Raz?

  This is before Whole Foods really blew up. So you were going into mainly independent health food stores, co-op type places?

• 41:04Speaker 01

  Yeah, like the Santa Monica Co-op and then the Whole Foods. But also we were at that era when you could actually just still go in and talk to a Whole Foods buyer and get them jazzed on it. And they would take it in. So that was how we did it.

• 41:15Speaker 02

  In a store, yeah.

• 41:16Guy Raz?

  You'd walk in with a bag of mate and say, what was it? Can I talk to the buyer?

• 41:19Speaker 01

  We had the same strategy the whole way along. We said, look, if you let us come in and demo our product, we'll sell you the product on consignment. And you can just basically sell whatever you you want. We'll take the rest with us. Well, what inevitably happened was it was like a top selling product in their store and they would take us in. And then we would basically, while we were on the road, we'd call back to Chris and be like, hey, send out a few cases to this store. And then we'd ship it via UPS for like the first four years. We shipped product out direct to stores via UPS.

• 41:50Guy Raz?

  I got you. So you would get these big, big sacks of mate. You guys would hand package it yourselves.

• 41:57Speaker 02

  You know, at that point, we weren't hand packaging. It was being hand packaged, but we were working with this group called The Achievement House out at Questa College. And it was a group, adults with disabilities. They did all the loose packaging for us. And then we also had a tea bag co-packer we worked with who put it in tea bags.

• 42:13Guy Raz?

  Right, because I imagine that selling loose mate was not going to go very far because most people are not mate baristas, right? They don't have the gourd. And so a tea bag probably made more sense practically, right?

• 42:26Speaker 02

  For, yeah, for most people, I mean, that was definitely, we sold more bags than loose. I think in the natural foods industry, at one point, our bags were the number two selling tea. And the loose was like number six. So, I mean, they both did really well relative to that that market.

• 42:43Guy Raz?

  All right. So David, you and your brother on your VW bus and Don Miguel is going down to SoCal. Chris, you're manning the headquarters in San Luis Obispo. This would be like five, six, seven years of driving up and down the west coast of the United States, setting up demos at any natural food store and trying to get people to try it, right?

• 43:07Speaker 01

  Correct. That was like till 2003. Then we started doing cross-country tours. You know, that was when we had to get the bigger vehicles, like the RVs.

• 43:16Guy Raz?

  I can't imagine how, I mean, that's a lot of work. Cause you're, there's a business to run based in San Luis Obispo and you are on the road, what?

• 43:26Speaker 01

  I mean, we did some tours that were just eight months long or six months long. We would just go. And I think Steve and Don Miguel and I personally served over 5 million cups of mate.

• 43:37Guy Raz?

  Wow.

• 43:37Speaker 01

  Like, we spent a lot of time architecting how to get as much yerba mate in people's hands. And then that was way easier to scale with cans and bottles as we grew. But in the beginning with Loose, it was very challenging and required a lot of preparation and a lot of breakdown. But the advantage was when you serve someone a really strong hot cup of mate or a hot mate latte, it was definitely even a little bit more impactful than just drinking a can.

• 44:02Guy Raz?

  Yep. But to do that, person by person by person by person is very hard. It wasn't like you had a $40 million marketing budget to take out billboards in Times Square and every bus in Los Angeles. You couldn't scale this thing. It was like, you know, one at a time. That's a lot of work.

• 44:20Speaker 01

  You're right. It was a ton of work and most people would never do that. They wouldn't live in vehicles for all those years. They, they wouldn't get along, their relationships. I mean, all those things. But the mate was always just so much about bringing us together and bigger than any one of us. And we actually had a lot of fun. I mean, it was a blast.

• 44:36Guy Raz?

  I mean, you never, but this is my question, David. You know, I think anyone at the beginning of their career, it's a grind, but you're doing this for a long time. You never got down. You never felt like, God, this isn't taking off as much as I had expected or as quickly as I expected it to.

• 44:52Speaker 01

  Well, I definitely felt that. I definitely was like, thought I would take off a lot quicker.

• 44:56Guy Raz?

  And that wasn't demoralizing?

• 44:57Speaker 01

  No, were you kidding me?

• 44:58Guy Raz?

  It didn't get you down?

• 44:59Speaker 01

  It was never a grind.

• 45:00Guy Raz?

  That's amazing. How? How?

• 45:02Speaker 01

  I loved everyone I worked with and we loved getting together. And when we got together and shared a gourd, you know, it kind of got to the point where it didn't matter how big or how fast. What mattered was like, survive until you thrive.

• 45:17Guy Raz?

  Chris, you are in San Luis Obispo. You see the numbers. You know, we're talking 2000, 2001, 2002, 2003, 4, 5, that it's, it's not profitable. Were you as optimistic as David and, and those guys? Or were you like, yeah, this is awesome? Or were you ever stressed? You had a kid?

• 45:34Speaker 02

  Yeah. Well, I think a big part of my role is balance as well. And the way that I looked at it was like, this is going to happen, but we don't know how long it's going to take. So let's try and build structure that can last a long time. And so, you know, if you go back to, as David mentioned, we, we got an SBA loan. We got a second SBA loan in 98, maybe. And then like a 200K SBA loan in like 2000. So maybe that was a total of like, you know, 350. So we didn't have any equity that we had sold or anything. And so we really were like, we really want to be super frugal and like, do this in the right way. So we don't have this outside pressure trying to drive us. And if it takes 25 years, or if it takes 50 years, or it takes 100 years.

• 46:19Guy Raz?

  I love it. No, I, I love that. I love that you had that patience and that, and that optimism. I love that. But not everybody would stick with it. And the business would not become profitable, I think, until 2011. So you're talking about 13 years of unprofitability for a consumer brand, for a drink. I can't imagine that's not scary at certain times.

• 46:44Speaker 02

  So we, you know, we were profitable early on because we weren't paying ourselves. We were, you know, basically just covering expenses and whatnot. And we were shipping via UPS. You know, we weren't making much, but we were sustaining ourselves. When it started to change was in all of a sudden, it's like, okay, now we've got a national footprint. We need to. Bring in the national sales manager and now we need a broker network and now we need a distributor. And you start seeing, you know, all those costs add up. And so you're right, from like, probably 2004 to 2011, we weren't profitable, but we were always close. You know, and so what we did was we started bringing in equity capital, but always from friends and families or angel investors. And so I ended up spending a lot of my time over that period of time raising money because we never went out and said, we're going to raise 5 million.

• 47:29Speaker 02

  It was like, okay, let's raise 250K. Let's raise another 500. And that way we were able to, you know, minimize the dilution, bring in the right, you know, at those smaller numbers, you can really find people that are really believe in the mission and vision and will stay with you long term. And many of them are still investors to this day.

• 47:47Guy Raz?

  What about media attention? I mean, you know, part of this is, you can explain to people what mate is, just word of mouth, but that's not enough. This is a very specialized product, especially in 2001, 2, 3, 4, 5, when you're starting out. Were you trying to reach out to press to get them to write about it?

• 48:07Speaker 02

  We did have a big media success in 2003 that actually led to our first near death experience.

• 48:13Guy Raz?

  What happened?

• 48:14Speaker 02

  So we were on the cover of this magazine called Women's World that was on, you know, at the check stand of every grocery store across America. And it said, South America's secret weight loss tea.

• 48:26Guy Raz?

  Oh, wow.

• 48:26Speaker 02

  Because yerba mate is known to suppress appetite. And so it's using a lot of weight loss pills in Europe. And so that headline came, we didn't know about it. All of a sudden, we just started getting calls and we started getting orders. And I remember it was like, September and, you know, our sales doubled from the previous month. In October, they tripled from the month before that.

• 48:45Guy Raz?

  Wow.

• 48:45Speaker 02

  November, they tripled again. And then all of a sudden, December, they stopped. And then January, we got nothing. February, we got nothing. And we had this like, oh shit moment, like what is going on?

• 48:58Guy Raz?

  Yeah.

• 48:58Speaker 02

  And what we found out was it was like a weekly. So it was out for a week or two weeks and then the next thing came on. So everyone wanted it. But for a very short period of time and the whole infrastructure, the retailers were ordering it, so distributors were ordering it and then we were making it. But by the time the retailers didn't need it anymore, there was such a lag that we didn't know. And so there was a glut of inventory and that's why we weren't getting sales for those next few months.

• 49:25Speaker 01

  But the other thing was they bought it all on consignment. I took the calls like from Vitamin Shop and GNC, I think it was. And I was like, oh my God, this is amazing, exciting. You say yes, and you're like, cool, sign the document. But it was consignment.

• 49:37Speaker 02

  I think only GNC was, yeah.

• 49:39Speaker 01

  But a lot of it came back.

• 49:41Speaker 02

  And the second irony to that was we had a major cash crunch, but we had a second piece of PR as well. And David ended up being on the cover of Money Magazine at this point.

• 49:50Speaker 01

  Wow.

• 49:51Speaker 02

  Talking about how successful we were and how great everything was going.

• 49:54Guy Raz?

  You were on the cover of Money Magazine?

• 49:56Speaker 01

  Yeah.

• 49:56Guy Raz?

  When was this?

• 49:57Speaker 01

  It was like right after it. And that was kind of embarrassing too, because Money Magazine was not a big deal to me. In fact, I was kind of against like a lot of like just traditional corporate behavior, but it was an article on social impact.

• 50:10Guy Raz?

  Okay.

• 50:11Speaker 01

  It was me and a few other people. Anyway, that led to our first significant investment that actually came in at the right time.

• 50:19Speaker 02

  One thing I just want to reference is we actually did not lay anyone off through that experience. And I bring it up only because it was, it was a big decision and it was kind of formative to how we grew. We decided that everyone would take a pay cut rather than lay people off. And so the Samias, we took the biggest pay cut, but everyone took a pay cut.

• 50:38Guy Raz?

  How many people were working for the company at that point?

• 50:40Speaker 02

  I think we had about 15 or 20 at that point.

• 50:43Guy Raz?

  And when you were on the cover of Money Magazine, David, I mean, you guys were maybe three, $4 million company. You were pretty small.

• 50:50Speaker 01

  I think that was about right. Yeah.

• 50:51Speaker 02

  Yeah.

• 50:52Guy Raz?

  Yeah. All right. 2005, a couple of things happened that year. You move your operations to Sebastopol, California, which is where I think your main headquarters, one of your headquarters is still located.

• 51:05Speaker 02

  And by this point, David was in British Columbia because he fell in love as well.

• 51:09Guy Raz?

  So you moved up to British Columbia?

• 51:11Speaker 02

  Yeah.

• 51:11Guy Raz?

  Wow. Okay. And that year, you start to sell bottled mate.

• 51:17Guy Raz?

  And you brought on a new head of sales who had worked for Coca-Cola, a guy named Pierre Ferrari. So a lot going on that year.

• 51:26Speaker 02

  Well, to rewind a little bit, at a pioneers conference before that, I had met Ben Cohen from Ben & Jerry's.

• 51:32Guy Raz?

  Oh, yeah.

• 51:33Speaker 02

  And gave him a sample. And apparently, he tried it on the plane and hated it. But he was impressed enough with our business model that he had one of his people reach out to us. And it turned out when they sold to Unilever, they created two small venture funds, two $5 million funds. One run by Pierre Ferrari called Hot Fudge and one run by Chuck Lacy called Bard Rock. And so they were both our first bigger investor, bigger meaning they have each invested like $150,000.

• 52:00Guy Raz?

  Yeah.

• 52:00Speaker 02

  And they were both on our board. And so that's how we got to know Pierre. And so he had previously been the head of marketing for Coca-Cola. But he was also very much into, you know, social justice and was invested in a lot of different interesting companies, doing fair trade clothing and whatnot. So it was a real natural fit for us.

• 52:17Guy Raz?

  Yeah, because you were a fair trade company from the get go.

• 52:20Speaker 02

  So when we started, fair trade wasn't really

• 52:23Guy Raz?

  A thing, yeah.

• 52:24Speaker 02

  A thing, but in spirit, the whole idea was that because mate natively grows in the rainforest, we can use it as an economic driver to steward and restore rainforest and be able to partner with the communities that live and rely on that forest. But from the beginning, that was the way that we operated. And so as fair trade became, you know, a more legal entity, that's something that we've got very involved with and very committed to.

• 52:47Guy Raz?

  I guess it's important to mention that like something like 90% of the mate grown is controlled by like three or four big companies in Argentina, right?

• 52:54Speaker 02

  So I think the growing is a little more complex than that, but it's a very consolidated.

• 53:00Guy Raz?

  And as a result, most of it is not grown in a sustainable way. Is that fair to say?

• 53:06Speaker 02

  Yeah, it's like, you know, virtually all sun grown mate. And any shade grown mate that exists tends to get blended in with the sun grown mate. So it's all essentially sun grown mate.

• 53:17Guy Raz?

  And you wanted to just sell shade grown mate?

• 53:20Speaker 02

  Yeah, our belief, not only because we felt like the highest quality mate came from the rainforest, but just intuitively because that's where It natively grows and it also is the, you know, what makes the whole business model work. We call our business model market driven regeneration. And the idea is that through the market, i.e. customers, people believing in our product, they will purchase a product that then drives the growers to be able to regenerate forests, be able to steward and store the forest they have. So is this whole market driven regeneration concept? So it relies on Rainforest Mate.

• 53:53Guy Raz?

  All right, 2005, that year you also start to bottle mate and sell it in glass bottles, presumably because, I mean, this is kind of the beginning, I think, of like the natural tea boom, right? There had been Snapple in the eighties and nineties and Arizona iced tea. But this is like, you're starting to see honest tea on the shelves at this time. You're starting to see like unsweetened teas. And so was the, was the thinking like, this is the only way to grow?

• 54:22Speaker 02

  Yeah, for sure. I mean, there's a combination of things. One is with the loose and bag market, we realized just in the United States, it's just a pretty small market. You know, statistically, in the United States, it's like 75 or 85% of tea is consumed cold. Plus, David and Stephen and Don Miguel had spent so much time making mate lattes and making mate taste so good. People loved it, but they would always say, we can't make it the way you make it. And so we felt with a ready to drink, it gave us the opportunity to make it the way we wanted to make it and then be able to share it much more broadly.

• 54:53Guy Raz?

  Yeah.

• 54:54Speaker 01

  The one other thing to add, after we had that really crazy cash crunch situation of having our sales really decline through our, classically, our strong months, like the fall, winter and spring, when it was cooler out and people would drink hot beverage. And now we're entering like the desert, the dry season, right? Hot weather. So Chris and I and Alex and crew, at that point, where it's like,

• 55:20Speaker 02

  We gotta come out with something cool. We need to be a four season business. And because we had the relationships in natural foods and because it wasn't that big of a stretch to find like a bottler, produce 100,000 bottles and put them in the stores where we thought they would do well, where we had a customer base is kind of how we started that business.

• 55:40Guy Raz?

  And at the time, it was glass bottles and you were insistent on, because glass bottles are clearly recyclable. And no matter what anybody says, plastic is not recycled, like 90% of plastic in the US is not recycled. Glass is very recyclable, but it's heavy and it breaks and it's riskier. It costs more to ship, which is why so many beverages are in plastic bottles. Did you at all consider plastic?

• 56:05Speaker 02

  I think in the beginning, we didn't consider plastic at all, partly for the environmental reason and partly just because we felt like from a health standpoint, you know, the plastic, you kind of get the leaching effect and whatever. And the cleanest way to drink something would be out of glass. Flash forward a couple of years when we were, you know, looking at how do we expand our reach? And we did consider plastic at that point, but ultimately decided plastic didn't make sense for us. And we opted to go with aluminum cans because we felt like it's the best out of those three containers, because it's so energy efficient to recycle. Flash forward five, 10 years and everything's in cans now.

• 56:41Guy Raz?

  Yeah.

• 56:43Guy Raz?

  Okay, here's the thing, making a drink, it's a great idea, but then getting it into the hands of consumers is another thing. From what I understand, if you're not in convenience stores, it's really hard to scale it. Like you've got to be in the corner shops, right? You can't just be in Whole Foods. You can maybe be a eight, nine million dollar business if you're in every Whole Foods. But beyond that, it's really hard.

• 57:06Speaker 02

  Yeah, that was our experience. Yeah. So, so for the first really year and a half, two years, it was just natural foods.

• 57:13Guy Raz?

  Yeah.

• 57:13Speaker 02

  And so I think to your question, Guy, about convenience, that was kind of the next area. And we knew to do that, we were going to need a direct store distribution, a DSD. And at our size, it was going to need to probably be a mom and pop type of operation. And so we reached. Out to people in our network that we knew and in particular Blaine and Seth from Honesty were really helpful and they introduced us to a couple of their early distributors. One was literally one a one person show based out of Berkeley. And so that was our very first distributor and we just started going up and down the street and selling into stores right around UC Berkeley. And then we got a second distributor that was up in this area and then we added one in Pacific Northwest and kind of just went like that.

• 57:55Guy Raz?

  Yeah, I mean, I'm curious, were you surprised at how challenging that whole thing was? Because you can get a distributor, but some of them are very small. And then you don't necessarily have control over where they're placed on the shelves. Is that what you discovered?

• 58:11Speaker 02

  Yeah, I think you're such a small fish in that pond.

• 58:13Guy Raz?

  Yeah.

• 58:14Speaker 02

  Just getting space on the truck is hard. Getting attention from the root salespeople is really hard because every month you have companies coming in and just laying huge stacks of cash on the table and saying, you know, every account you get, we're going to pay you a hundred bucks. And that was never the way we operated. And, you know, kind of a funny related story, one time our LA distributor, I wasn't doing the presentation, but the person on our team that did it, they had to follow Body Armor and Body Armor brought in their new investor, Kobe Bryant.

• 58:42Guy Raz?

  Yeah.

• 58:42Speaker 02

  And so that was just the constant challenge because there was so much money in the industry and people were paying to get the placement and we wanted to really make sure we earned it.

• 58:50Guy Raz?

  Yeah.

• 58:51Speaker 02

  But one other thing is, you know, we also had this insight that, and I think Pierre actually came up with this, was that we could either be a gentle rain, meaning that we can spend a little bit of money and market nationally, or we can create thunderstorms. And the idea was like, let's focus really tightly geography so that we can really make an impact. And so that's what we decided to do. We put all of our money into sampling and everything in the West Coast so that we could really have an impact there and people felt us.

• 59:20Guy Raz?

  I'm curious about a moment in the company's history. 2009, from what I understand, the brand is available, the bottle's still, you're not quite yet in cans, but you're in 6,000 stores, which sounds like a lot. You're reporting about $10 million in annual sales. So you've been around since 1996. So what, 13 years later? You're still a very, at this point, a tiny company or small business. You were still losing money. Was this a kind of an inflection point? Was there any moment where you're thinking, maybe we won't be sustainable, Chris?

• 59:54Speaker 02

  So there were always worries. I, for years, I mean, was managing cash flow so tightly. I mean, we would certainly David, Stephen and I missed payroll, you know, more times than we would like to admit. And at the same point, you know, we saw friends, companies that were, you know, just hockey sticking and it's like, wait, we're getting left behind. But there was never a long-term concern. It was always just short-term, like, okay, how are we going to get through this valley? How are we going to get, you know, to the next peak? How are we going to make this work? We joked every year, this is going to be the year of the yearba.

• 1:00:26Guy Raz?

  This is the year.

• 1:00:27Speaker 02

  Next year is the year of the yearba.

• 1:00:30Guy Raz?

  When we come back in just a moment, how Chris, David and the team finally make it work and why they decide to start a second massive venture, building their own distribution company. Stay with us. I'm Guy Raz and you're listening to How I Built This.

• 1:00:51Speaker 05

  With the Venture X Business Card from Capital One, you earn unlimited double miles on every purchase. Plus, big purchasing power means you can spend more and earn more. The Capital One Venture X Business Card. What's in your wallet? Terms apply. See CapitalOne.com for details.

• 1:01:17Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2009 and Chris, David and the rest of the crew have been grinding for over a decade. Guayaquil has yet to really take off, but they aren't even thinking about giving up. Although it's clear some of their competitors in the beverage space seem to expect that they will.

• 1:01:39Speaker 02

  You know, I was getting a lot of calls in like oh, four, oh, five, oh, six from people that wanted to buy Guayaquil. And some of them, what they said was, you know, we just know that about seven years, people get tired and we're looking for a deal. Like, we're hoping that you guys are kind of burned out and we can grab it. But then in very end of 2005, so almost like 2006, we launched the beverage. And it was almost like we were a startup now. And so it was really much like a second wind. So if you think about being in 2009, in a way, we're only like two or three years in on the beverage business at that point. But we knew that we needed to reach more people. So our thought was, we wanted to come up with a product that had a more simple flavor profile that would really resonate with a wider audience and that we could then go

• 1:02:23Speaker 02

  more into convenience and really be able to grow. And so we did raise a little bit of capital again. And at the end of 2009 is when we formulated the lemon elation in a can, did a test launch in San Diego, and then later in 10, we came up with the other two, the rebel berry and the enlightenment.

• 1:02:41Speaker 01

  Think about everything was, it's been such a long journey. Everything was relative. Like, it took so much energy and time to like make mate lattes on the road. There's honey stuck on the floor and on your clothes and like plants and like.

• 1:02:55Speaker 02

  Yeah.

• 1:02:56Speaker 01

  And then all of a sudden, we have bottles and they're like, great, they're, they're awesome. They can't quite scale, but now people can actually drink it just by cracking it open. It was this whole like, oh, my gosh. And that was exciting. But when the cans hit, it was a whole other thing, right? It was like another generation of consumers. All of a sudden, young people could use this product in place of all the other canned drinks. And now we're starting to build like around 2011. So it was a whole renewed sense of like optimism and like, wow, okay, this product can do it.

• 1:03:28Guy Raz?

  Did you, Chris, at any point in the, the period where you weren't profitable and you had outside companies coming to you, and I'm sure they were saying, guys, I mean, Coca-Cola bought on ST, right? There's all this consolidation happening. I'm sure you were getting the same pitches, like, you're just not going to make it as an independent company. You've got to be with a bigger player, but we'll respect your values and you guys can run it just as you want to run it and we'll put an infusion of cash in. That never, ever sounded tempting at all?

• 1:03:56Speaker 02

  No, and I think, you know, something maybe I didn't highlight before in talking about, you know, what also motivated us is for us, it was never about the money. It was about the mission. And at the same point, we very much felt a responsibility to the growers.

• 1:04:11Speaker 01

  Yeah.

• 1:04:11Speaker 02

  Because, you know, they were relying on us and especially as we did grow and we're buying more and more mate from them, you know, if we partnered with another company, they weren't going to get it. The press releases are always so positive. And then a year or two later, at most, the founders are out and the company's doing different things. And in fact, I was on a number of panels at different like investment conferences and stuff where I always represented because when we raised money, we raised it with no exit strategy. And typically that's the first question investor has is, well, how am I going to get my money back? And we would say, we're not sure. We're not ruling out selling, but it's not something we're focused on. We really want to grow this for the long haul. But we just felt like that was a much more sustainable business for us. And it allowed us to grow slower and kind of figure things out.

• 1:04:54Speaker 02

  Had we grown fast out of the gate, we wouldn't have figured out the bottle or the can. We wouldn't have had those products. We probably would be owned by someone already because it seems like the faster you grow, the faster you kind of hit that plateau. Whereas if you can grow slower, you can really find your market and not buy your market.

• 1:05:10Speaker 01

  And we wanted to create a legacy business that was alive and thriving beyond us. That doesn't preclude us from going public. It doesn't preclude us from partnerships, doesn't preclude us from anything. But it does mean that we need to partner with the right people at the right times and make the right moves. And it's interesting that like you, you referenced honesty, which has just been announced by Coca-Cola that it's going to be discontinued by the end of 2022. So that brand is no longer a legacy business. It'll be a tombstone. And it's like, okay, it was a good run and that's great. But we see beyond that. All of us have come together for reasons that we felt like the, the current paradigm of business and capitalism isn't serving people the way it needs to be served.

• 1:05:53Speaker 01

  It could be done better with more interest than just the stakeholders or just the people that own the stock. And so that's really the driving force behind a lot of our decision making.

• 1:06:04Guy Raz?

  All right. So in 2010, right, you've got the cans out into the world. And by 2011, you actually have your first, I think, your first profitable year, 15 million in revenue.

• 1:06:14Speaker 02

  Yeah.

• 1:06:14Guy Raz?

  And then a few years later, you do something that I think is really interesting because I almost never heard of this. You essentially decide to create your own distribution company. And before we get to how you did it and what you did, right? Help me understand why you even started to think about doing something like that.

• 1:06:32Speaker 02

  In around 2014, we weren't national. And we were at the stage of growth where, you know, we were approached by the big beverage companies and could have been on those beverage trucks. And had we done that, we probably would be two or three times bigger than we are now. But we also might be that size and getting canceled, you know? Or we might be not involved. It might be a product that we didn't, don't feel good about. And so at the time, we thought, what are other options? You know, we could build out this third-party network with a whole range of independents. But we knew a lot of people that had done that and it's, you know, you have like 200 distributors and, you know, hundreds of employees. And it's just so much to manage and no one cares about your product as much as you do.

• 1:07:11Guy Raz?

  Yeah.

• 1:07:12Speaker 02

  And so we thought, why don't we try it ourselves and see how it goes?

• 1:07:15Speaker 01

  And the other big appeal beyond what Chris just shared, you know, the sort of the lack of control of destiny was more the potential control of destiny with our own vehicles. In other words, we wanted to have the energy of our brand translate through our drivers and the, in the relationship. So it occur at the store level and have way more visibility into that relationship. Like, okay, you have a great relationship. Maybe you can get a cooler in there. You have much more reporting over what's happening at the flow through and a much closer connection to the retailer. And then ultimately the customer, because we kind of, we always had that vision of like seed to shelf. Like all the way from the yerba mate tree to the shelf.

• 1:07:57Speaker 01

  Ultimately would be a great way to steward the product all the way through.

• 1:08:02Guy Raz?

  Well, let me ask you a quick question before we get there. I mean, let's say you did partner with a large distributor. Basically, is a company that has the trucks that you load your product on and then they drive it to the store and then they put it on the shelves of the store. If a big company came to you and said, hey, we want to distribute your product, how would that affect your values? I mean, you say now that you might have been even bigger than you are now, had you done that deal, but how would that have been a compromise?

• 1:08:28Speaker 02

  More so a compromise from a business standpoint, I feel, because, you know, if you go with one of the three big companies, you're with that company. They make their money off of carbonated soft drinks.

• 1:08:39Guy Raz?

  Yeah.

• 1:08:39Speaker 02

  And that's, that's what dominates the shelf. That's what dominates the truck. If you're Coca-Cola and you own Coke and you own Diet Coke, your margin on that is through the roof. And so there's a limited room for other products on those trucks and they have to really perform. But a lot of times when you're building something, it doesn't perform out of the gate. It takes time to build it. You know, I think we have seen that with other companies when they've been acquired by one of those companies and they get on those trucks and they just can't meet the volume thresholds because it takes time to build. And, and so then you start trying to discount and move quickly. And that's where it really changes the way the business is run.

• 1:09:15Guy Raz?

  All right. So 2017, you guys decide, we're going to build our own distribution network. What literally does that mean? Does that mean you have to buy your own trucks, hire your own drivers? Because that's a different company. That's a logistics company. Did you essentially have to start a brand new company?

• 1:09:33Speaker 01

  Yeah, it was a new company that was started.

• 1:09:36Speaker 02

  And to be fair, it's not David and I that built that network. We started a separate company, an LLC out of Jacksonville, Florida, with a separate team that ran it and built it. And from the beginning, the idea wasn't for it to necessarily be a national distributor. It was to fill in all the gaps where we weren't because there's a lot of places in the, in the country where there aren't good third party options. It's either going to be, you know, one of the big three or like an Anheuser-Busch.

• 1:10:00Guy Raz?

  So, all right, over the next, I think, two years, you started to buy Chevy Bolts. This was going to be your fleet. Great electric cars, very small.

• 1:10:10Speaker 02

  Yeah.

• 1:10:10Guy Raz?

  Eventually you would buy 300 of these. I think you're the biggest customer of Chevy Bolts in America. First of all, how do you fit enough product in a Chevy Bolt to get it to enough stores?

• 1:10:23Speaker 02

  Well, Cooley, after a year, they developed one based on our feedback. And so they took the back seats out, put additional suspension in, had a cage. But our model was very modular. And because we started out going after markets where, you know, that were new markets for us, where we were in natural food stores, but we didn't have any convenience distribution. It was very small, small scale to start with. And so it was just starting from scratch, basically knocking on doors, opening accounts, making it happen. And so, you know, a small vehicle that could hold 60 cases was sufficient in those areas. You know, in Wyoming, we might only have one vehicle, for instance, one person, one vehicle. But as the model shifted and we started taking over more distribution ship, and as the sales grew, then that obviously became

• 1:11:07Speaker 02

  a huge limit. Our belief was that, you know, within two years, there'd be electric vans and trucks. And there aren't.

• 1:11:14Guy Raz?

  Right. With this distribution system now that you started in 2017, first of all, how did you finance it? I mean, 300 vehicles and 300 drivers and a team to manage that? And, you know, how did you finance that?

• 1:11:31Speaker 02

  When we started it, we were able to self-finance because we just started, you know, I think our first market might have been Jacksonville. And that was, you know, maybe three or four cars we leased, three or four people. And then, you know, as we started adding markets, at a certain point, it outgrew our ability to fund that cash flow. And so we needed to raise some capital. So 2019 and end of 18 into 19, I think we raised about 30 million. And most all of that went to, all of that went to distribution. That was purely 100% distribution.

• 1:12:02Guy Raz?

  All right. Here's a question, and I think it's a fair question to ask because you are focused on restoring parts of the rainforest. I know you're very committed to Trying to finance the restoration of like 2 million acres of the rainforest. But, you know, how do you guarantee, given that you're not in Argentina or Paraguay or, you know, or Brazil, how do you make sure that's the case? How do you make sure that the farmworkers are treated well? I mean, because your values are so aligned and so tied to, to that idea, how do you make sure that you're not getting the wool pulled over your own eyes?

• 1:12:36Speaker 01

  Yeah, well, I mean, that is what our South American team focuses on. We have, you know, dozens of people down there on the ground in each country, Paraguay, Argentina, and Brazil, working with the communities that we source from. Like, there's no broker, and that's probably one of the biggest distinguishing factors between Guayaquil and other businesses. Like, these are relationships that people have cultivated over more than two decades now.

• 1:12:58Speaker 02

  And to your point, Guy, I mean, we have, we have uncovered a lot over these years because we've always invested in having a team down there. And I mean, we had an example where we were paying a cooperative who had a number of growers, and it turned out that the cooperative wasn't paying the actual growers. But the growers thought that we weren't paying them. So then our team had to go grower by grower and connect with them, explain what happened, carry cash through the countryside and actually pay cash to ensure that this was happening. And so building that team down there is critical. We have offices in Paraguay, Brazil, and Argentina, and we have a full processing facility as well in Brazil.

• 1:13:37Guy Raz?

  I'm curious about the five founders who are still actively engaged in the business. You're all distributive, you all live in different places, right?

• 1:13:45Speaker 02

  Stephen and I are both in Sebastopol, but yeah, everyone else is somewhere in a different place.

• 1:13:51Guy Raz?

  And how, how do you guys make that work? Do you get together regularly, quarterly?

• 1:13:55Speaker 01

  Yeah, we always have. That's been part of the beauty.

• 1:13:58Guy Raz?

  How, how often?

• 1:13:59Speaker 01

  Oh, we're together several times a year somehow, usually around surf trips or, or work gatherings.

• 1:14:05Speaker 02

  I mean, I think for, you know, a lot of it, it would, it would probably be, you know, 10 times a year. Obviously during COVID, that's changed a bit. But we all travel and we meet where we are. But the other factor is that some of us have always been apart throughout the whole journey just because of the nature of being on the road. And so we've, we've gotten really good at just communicating and just because we're so connected to the, the mission and vision, you know, even when there's times when we haven't spoken, when we get back together about something that we haven't talked about, like 99% of the time, we're completely aligned on it.

• 1:14:35Guy Raz?

  How many employees do you have now?

• 1:14:37Speaker 02

  I think somewhere around 450.

• 1:14:39Guy Raz?

  And that includes the distributors?

• 1:14:41Speaker 02

  Yeah, the majority of that would be the distribution business.

• 1:14:45Guy Raz?

  David, you mentioned earlier that this can be a billion dollar business one day. Mate is a whole, from what I understand, is closer to a 300 million global business. And that includes all mate around the world sold. And you guys now are about a third of that. How big can this grow?

• 1:15:03Speaker 01

  Well, I think it can it can grow to be any size that a beverage company could grow to be. And it really comes down more to execution than anything. And if anything, I have more faith in that than I ever had before, especially because we're part of really driving for this regenerative movement. We want all kinds of businesses that are stewarding the planet and taking care of people. We want those kinds of businesses to be successful, to do just that.

• 1:15:33Speaker 02

  And I think for us, we had a big reset in 2020. Covid hit us hard and it was a moment for us to reflect and say, what do we really want? Do we sell the company at this point? Do we want to bring in other partners? What do we want to do? And I think David and Alex and I were like, we do feel like we need to bring in the expertise to be able to take this to the next level. Because we got to 100 million without Costco, Walmart, Amazon, any of those big retailers that are usually a big part of it. And I think we're just engaging with them now as we hit like 150 or so.

• 1:16:04Guy Raz?

  So you're not in Costco or Walmart or any of those places yet?

• 1:16:07Speaker 02

  We just, I think we just started in Costco this year.

• 1:16:11Guy Raz?

  I'm wondering, I mean, as you now approach 150 million in revenue and start to get into the bigger stores like Costco and Walmart, you're obviously likely to grow more and more. You're not ruling out selling your company one day, but it's not something that you can imagine anytime soon?

• 1:16:29Speaker 02

  Yeah, and too, I think going back to the scale conversation. You know, one of our competitors is owned by Pepsi and they're on the Pepsi trucks and they have unlimited distribution, but it's not really working. And I think it's because it's just premature. The market's not ready. There's not enough customers that know about it. So I think for us, we can make the decision that feels like it's right for the brand over the long haul. And so if that means going public, then that's a path. If it means partnering with a bigger company, then that's a path as well. But there's nothing on our agenda currently.

• 1:17:00Guy Raz?

  When you think about the journey you took, I mean, this is basically a company that started in 1996, 97, took a long, long time to reach 10, 15 million dollars in revenue, you know, 13, 14 years, and now you are where you are, easily the biggest Mierba mate brand in the United States, one of the biggest in the world. There's not been an easy path, and I understand that you've enjoyed pretty much every minute of it. I think that's amazing. But it doesn't take away from the fact that it was hard. How much of that do you think has to just do with the hard work you put in, the years of driving door to door, the setups of making millions of cups of mate, what you did, and how much do you think has

• 1:17:42Guy Raz?

  to do with just getting lucky, you know, the natural foods business and industry kind of coming up, and Whole Foods expanding, and people becoming more aware of natural foods? What do you, what do you think?

• 1:17:52Speaker 02

  So I'm an incredibly grateful person, and so I could easily say it's all luck. I think luck is more of the accelerant, and it's the, the work that I think links those lucky moments. And in some cases, the luck maybe saves your life as well. In one way, it's lucky that I, that I met David, Alex, and Miguel, and Stephen. But I, I'm humbled by what we've been able to create and what we have yet to create, and I know that luck definitely plays a big part of it.

• 1:18:21Guy Raz?

  David?

• 1:18:22Speaker 01

  Well, I think you, you make your own luck. Okay. Like, you can't really look back and say how it would have been different. But I feel like we made our own luck by really investing in connection and relationships. We tried to do right by people we worked with, whether it was the Achievement House, you know, the adults with disabilities that first packaged our loose mate in tea bags, or like showing up at a store and like connecting with the store buyers, the front ends, and like really making someone an incredible mate latte. Like, the relationships that Chris and Stephen and Don Miguel and Alex and I'll have with each other, like, all of that is very meaningful and profound. Is there luck? Well, sure, we've survived until we thrive. We're still doing it. We were like

• 1:19:06Speaker 01

  on the bleeding edge for most of my career, and now I just say we're on the right side of history.

• 1:19:13Guy Raz?

  That's David Karr and Chris Mann, two of the five cofounders of Guayaquil Yerba Mate. By the way, that VW bus that David and his brother Stephen drove up and down the West Coast way back when they first started serving mate, it actually has a name. It's called Danny. Stephen painted the side of the bus with images of the rainforest and a mate gourd above the message, "Honk if you pack 'em." Hey, thanks so much for listening to the show this week. If you enjoy our show and want to show your support, please help us spread the word. Tell a friend about How I Built This or send out a message on social media. If you want to contact the team, our email address is [email protected]. If you want to follow us on Twitter, our account

• 1:19:56Guy Raz?

  is @howibuiltthis and mine is @guyraz. And on Instagram, we're @howibuiltthis and I'm @guy dot raz. This episode was produced by Alex Chung with music composed by Ramtin Arablouei. It was edited by Casey Herman with research help from Josh Lash and Catherine Cypher. Our production staff also includes Neva Grant, J.C. Howard, Sam Paulson, Liz Metzger, Kerry Thompson, Elaine Coats, John Isabella, Chris Messini, and Carla Estemez. I'm Guy Raz and you've been listening to How I Built This.