How We Started A $1.5M Cane Sugar Biz Landing Our Product In Whole Foods

$125,000
revenue/mo
3
Founders
10
Employees
product
Just Panela LLC
from Boulder, Colorado
started June 2015
$125,000
revenue/mo
3
Founders
10
Employees
1.84M
alexa rank
661
followers
691
followers
email
productivity

Hello! Who are you and what business did you start?

My name is Scott Unkefer and I’m the Founder and CEO of Just Panela LLC. “Panela” is the name for the form of Unprocessed, Unrefined, Artisanal, and Organic Cane Sugar in the Region.

We have been in Whole Foods Market – Global for 2 years along with nationwide and regional coverage in thousands of Natural Foods markets and chains. We also sell as an ingredient to a rapidly growing list of food, beverage, and distilled beverage products. The primary ones being Rum, Chocolate, Baked goods, Cold Beverage, Kombucha, and Espresso based.

We have 2 operations:

Colombia, South America

We purchase, package, and export, amongst a number of other things here. So this is or ERP operation so to speak.

Boulder, Colorado

We manage the importation (Customs and FDA Clearance), Shipping & Logistics to our Fulfillment centers, Distributor and customer relationships and fulfillment, Sales, and Marketing. So this is our CRM operation so to speak.

Our flagship retail product is our 1lb bag seen here.

how-we-started-a-1-5m-cane-sugar-biz-landing-our-product-in-whole-foods

how-we-started-a-1-5m-cane-sugar-biz-landing-our-product-in-whole-foods

… And a picture of the Founders and Partner – Farmers. Or, “Panaleros”.

how-we-started-a-1-5m-cane-sugar-biz-landing-our-product-in-whole-foods Left to right: Scott Unkefer (CEO, Founder), Ivan Vasquez (Partner and a leading “Panela”/ Cane Sugar expert in Colombia), Robert Thomas (Co-Founder), Diomes (Packaging Manager), Roosber (Packaging)

Our current Annual Income is $1,500,000/ year.

What's your backstory and how did you come up with the idea?

I had just moved to Medellin, Colombia in 2011. I would, about every morning, go to my local “Juan Valdez” brand coffee shop and notice these single serves of “Panela” ‘endulzante’. Spanish for ‘sweetener’.

I wrote it off as just another artificial sweetener but my curiosity got the best of me. I asked the barista “What is this Panela stuff?”. They replied “It’s sugar!”. Alright I’ll give it a try. I opened a sachet of this fluffy golden powder.

It wasn’t a crystal or hard like a rock like refined or turbinado sugars. I put it in my cappuccino and that was the famed “ Aha! ” moment. It made for the best cappuccino I had ever had.

My favorite business entrepreneur quote comes from Difference, Written by Bernadette Jiwa. It goes something like this:

“Don’t look for a void in the market and then go try and fill that void. Find something that when people experience it they say to themselves “Well this is what I wanted all along.”.

Panela did that for me. It’s organic, unprocessed, unrefined, and natural. It is not crack cocaine - chemical sugar. It keeps the natural properties of the cane grass including taste, texture, color, vitamins, minerals, and amino acids.

Take us through the process of designing, prototyping, and manufacturing your first product.

Here’s an interesting part; The Colombians didn’t see Panela as a sweetener. They saw it as… Panela.

It is/ was it’s own food product separate and aside from a straight sweetener or ingredient. In Colombian lore, and some of it is true, it has various beneficial health properties to it. It is a stomach soother for an upset stomach.

It was a ‘couple of gringos trying to ship pallets of powdery substance out of Colombia to the U.S. It couldn’t have looked more suspicious. I was laughed out of meetings with a couple logistics companies in the first year or two. They wouldn’t touch us.

This does seem true to us too. It relieves cold and flu symptoms mildly as well. A hot panela and lemon tea is made. I’ve even heard it said it’s good for your teeth! This is a tough one to get behind. It does have a very high recommended daily intake of Manganese. An extremely valuable mineral that I’m told is pretty rare in the standard North American diet. And it is good for bones.

Here’s another interesting part; When I arrived to Colombia and the idea, the “Paneleros” (panela farmers), were a dying heritage product and trade in the country. There were a few reasons for this;

1 - It was considered a “low class product”.

Because the “campesinos” (rural Colombians) used it and made it. Colombia can be very Classist in this sense. And for, say, some financially-enabled Colombian entrepreneur to get involved with Panela would not be a ‘high class thing to do’. And in this same vein the children of the Paneleros didn’t want to continue to ‘work in the fields’ in the family business. In one elder Panelero’s words; “My boys they just want to move to Bogota and become soccer stars”.

2 - There was never any real positioning post-farmer done with the product.

In fact, the powder was hard to come by. The Paneleros considered that final step extra, unnecessary work instead of just making these “hockey pucks”. An incredibly hard disk of panela sold to the markets that then the end user had to chip apart with an ice pick and put in hot water for it to dissolve. It didn’t occur to them to get it to a powder form for much easier consumption or dissolution.

So I discovered it and proceeded to position, or, re-position it for the North American and greater ‘western’ market. We sell to Australia, Spain, France, Kuwait, and of course Canada as well. And have ongoing negotiations with Germany and the Gulf Countries.

Design and product quality

We have won awards both at CoffeeFest (Best New Product - Consumables) and Fancy Foods NY (5 of 5 stars, Product Quality) for our Design and Product Quality.

how-we-started-a-1-5m-cane-sugar-biz-landing-our-product-in-whole-foods

You’ll notice we had an artist draw the “USDA Organic” into our front brand character art. We were called up by both the USDA and our Nationwide distributors telling us this is “illegal” and we cannot apply an altered version of this seal on our labeling. Bah Humbug.

Manufacturing & Challenges

There is NOT a powder-like food substance in the world that is more difficult to package and micro-package than Panela. As we say; “Much better for human consumption, terrible for [packaging] machine consumption”.

It is NOT a crystal or a rock like all other cane sugars. Thus it dissolves incredibly well and fast. For machines, however, this means it melts easier and faster. Sticking and accumulating to different steps of the weigh, form, fill, or seal steps that packaging machines are employed to do. We theorize that this is a major driver as to why ‘Big Sugar’ keeps granulated sugar in the forefront of human consumption. It has ½ or 1/3 of the machine and human labor time to package as Panela does raising the cost a great deal.

We are the manufacturer. We don’t contract-package. We felt it was completely necessary to own the product packaging/ manufacturing and we were right for two reasons:

Because of the difficulty in packaging and micro-packaging Panela, we have had to introduce a great many customizations to the packaging machinery. We have also had to work directly with our Panelero Partner to produce 3 distinct forms of pulverized panela.

  1. A very-low-humidity panela for the individual serving size sachets
  2. A slightly more humid panela for the 1, 5, and 55lb.
  3. A very minimally ground form of panela for the Rum world

The second reason is, we could not put the production in the hands of a third party in a country like Colombia where, time and delivery dates are extremely loose concepts. We already have an incredibly complex supply chain with some of our packaging coming from overseas simply because it doesn’t exist in Colombia in the form we wanted. And then dealing with strikes, road closure either from natural or human conflict occurrences. And clearance of containers out of Colombia and Into the U.S. It actually took quite a while to gain the trust of shipping logistics companies in Colombia to trust and believe we were in the business of exporting the powdery substance that we export and no other.

Describe the process of launching the business

As mentioned, this was a multi-national business from the beginning. And none of ‘us’ had experience in import/ export, packaging, or natural foods industries prior! So it was trial by fire and learning in real-time in the truest sense it could possibly be.

On top of which it was a ‘couple of gringos trying to ship pallets of powdery substance out of Colombia to the U.S. It couldn’t have looked more suspicious. I was laughed out of meetings with a couple logistics companies in the first year or two. They wouldn’t touch us.

The points of success that allowed us to get over the trust hurdle:

Getting a facility and getting it in the right place (pictured below)

Luckily we decided on a facility very near the airport outside of town. As such our bodega (facility) group was full of flower exporters and thus export logistics companies.

This solved about ½ of the trust problem that we were doing what we said we were doing. The next thing we did is talked to the Porteros (Gate Security) about if they had any family; brothers, sisters, cousins, that wanted to come package for us. Of course they did. That’s how it works, particularly in Rio Negro, Colombia. This gave all parties involved, the shipping logistics company and the bodega community in our gated bodega space 100% trust that we weren’t up to nefarious exports.

how-we-started-a-1-5m-cane-sugar-biz-landing-our-product-in-whole-foods Colombia Packaging Facility

From a case or two to a 40-foot container took us 4 years.

We were not a heavily funded company, about $300K put in. With this we had to buy packaging machines (plural), straddle stackers, sealers, industrial shelving, electrical facility work, and ‘get off the ground’ costs and a completed supply chain that, for some products, goes from China (bags) --🡪 Colombia(packaging) -🡪 Miami (import) -🡪 Ohio (Flex Fulfillment from parcel to pallet).

“Get off the Ground” – from a Marketing and Sales perspective

Incredible product

We had an incredible, unique, award winning product with award winning labeling and art.

A great story

We, and Panela both, had a great story - “A couple of gringos in South America combining and bridging their culture and business culture with a cultural heritage product that is self sustainable and naturally and organically cultivated from fledgling farmers that were dying a slow death and that needed us as much as we needed them. It wouldn’t be offensive or wrong to say farmers have no marketing or positioning expertise at all. As mentioned before they were selling hockey pucks!

Introducing it to the Market

Once we had GOOD Food Brokers and packaged product targeted to both the Coffee world (individual serving sachets) and the Grocery world (1lb bags) we went to CoffeeFest NY and entered and WON the show for Best New Product – Consumable!

how-we-started-a-1-5m-cane-sugar-biz-landing-our-product-in-whole-foods

Next, we went to Fancy Foods NY, the most important and competitive food show there is. We entered the product competition there sighting our winning at CoffeeFest. And with that we were 1 of 5 food products chosen in the entire show! The Panel of judges, by the way, being the head buyers 7 of the most important Natural Foods and Grocery businesses in America.

Well, we were the only product to receive 4 out of 4 stars panel-wide for our product!

how-we-started-a-1-5m-cane-sugar-biz-landing-our-product-in-whole-foods

Food Brokers

Before doing all of what I wrote before do this; Identify the top tier regional food brokers in the regions your product works. Take your product to them and see if they are already rep’ing a competitive product and if not are willing to represent Your brand and product(s) and take you on. We were very lucky in this regards.

The Sugar/ Sweetener category in any market is considered a relatively low velocity category and as such much lower competition as well. So finding top tier food brokers that aren’t under contract with a competitive category product wasn’t that hard.

So there are two questions:

1 - Is the food broker already rep’ing a product in your category and therefore unable to represent yours? 2 - If not, are they willing to represent yours? If the answer to number one is ‘No’, and the answer to number 2 is ‘No’ then you don’t have a good product and should probably reassess your product, business, and brand.

Warning on food brokers

The entire model food brokers are based on. As well as the entire Natural Foods/ Grocery Industry is best analogized by Newman’s Own. Or in my case, Wholesome Sweeteners.

A product line that occupies at least 1 entire shelf in a category. With an entire product line that occupies an entire shelf there is enough movement (sales) that justify the $$ model that the food brokers, and the distributors, and the retail work on.

Can you actually crack into the Natural Foods/ Grocery world without them? No I think not. They are necessary for the first couple of years even though they are a cost center.

Category Buyers will NOT even look at you or your new-to-the-market product(s) and brand without the Cesarean thumbs up by a known, respectable food broker. It is a revolving door industry. All those food brokers used to by category managers for Natural Foods/ Grocery. They build up their network that way and become brokers.

We, however, are 1 to 2 SKU’s in a low-velocity category in a market therefore long term the food broker model does not work for us. What we do have is an ingredient. Thus we have Rum, Chocolate, Cookies, BBQ sauces, Kombucha, and a number of other food or beverage products that we sell to. 😊

Since launch, what has worked to attract and retain customers?

Having Whole Foods Global carrying our product has had an ongoing effect of educating and attracting exactly the customer profile our product is designed for.

One thing I don’t think many food/ beverage manufacturers realize is that the distributors are also their customers. Since management and maintenance of the distributors is something that has become 100% my responsibility I’ve made personal relationships with my counterparts in all departments I interact with at the distributor companies too. Not just the SRM (Supplier Resource Manager). But the specific regional buyers, the trucking/ shipping managers in the warehouses, etc. Also, the port people that manage our containers and pallets passing through the process of being a product on a boat, to in a port, to leaving a port. I make everyone my friend. And so many people don’t do that to them and for them that they are particularly appreciative of it!

We have become more web-savvy as well. But we also make it a point to send personal, human emails and responses to every order that comes in through our website. This helps a lot with reorder.

It’s pretty funny, we’ve even had the Stripe Billing System guys whose service we use order from us. Hah!

How are you doing today and what does the future look like?

For competitive reasons I really want to say what our current and quarterly business plan and focus are on. I can say that it’s been interesting.

There are other cane sugars from other parts of the world that did exist in the states and have all but disappeared. Demerera, Muscovado being two well now.

They mysteriously disappeared completely in retail and almost completely in bulk and that’s driving different ethnicities of customers to us once they find out about us as well as regional and other non-nation-wide natural foods distributors to pick us up.

how-we-started-a-1-5m-cane-sugar-biz-landing-our-product-in-whole-foods

Through starting the business, have you learned anything particularly helpful or advantageous?

In countries like Colombia 90% of the companies try to pay workers as little as possible. And then they wonder why they are getting stolen from and have such high churn rates. Pay people a living wage!

They’ll be proud to work for you and feel like they’re a real part of the company. The current minimum salary here is, I believe, ~$260 dollars a month ☹ Who can live on that? We haven’t lost one facility worker in 4 years.

What platform/tools do you use for your business?

Whatsapp is easily the most used business communication tool throughout out business. From Austin, Tx to Boulder, Co., to our Coworking office in Medellin to our Packaging Facility 45 minutes up the Mountain in Rio Negro. All sub-middle-class Colombian do not own a laptop. This is one big reason why.

Gsuite is of course heavily used. And we’ve finally gotten around to using Quick Books and produce Profit and Loss statements, balance sheets etc.

how-we-started-a-1-5m-cane-sugar-biz-landing-our-product-in-whole-foods

What have been the most influential books, podcasts, or other resources?

High Tech Ventures by Gordon Bell, cofounder of Intel. It is out of print. <sarcasm> I know, that helps a lot doesn’t it! </sarcasm>.

I read everything. I think Forbes and WSJ are the two best business periodicals.

Advice for other entrepreneurs who want to get started or are just starting out?

Don’t work on stupid ideas!

I have a friend down here in Medellin Colombia for example right now that wants to get in the game of importing e-cigarettes etc. This is an example of a stupid idea. It’s basically a tobacco product. So customs is going to consider it almost illegal to bring in and importing to ‘anti-importing’ countries like Colombia is brain damage to begin with let alone something that is clearly for commercial purposes, by a gringo, that’s basically a tobacco product. Everyone is going to hate him.

I bring money in and employ people and export a beautiful product Colombia is very proud of. Everyone loves me.

Are you looking to hire for certain positions right now?

Sales

Research and Identify the top 3 regional specialty/ gourmet/ natural foods independent store distributors in the markets we’re not in and get our products into their distributorship.

PR/ Marketing. Work on our marketing from web to podcasts to submitting our educational material about all things panela and Just Panela®

We have great story and it needs more dissemination. Thanks Starter Story for contacting us and making me write our story!

Links

skype: sunkefer

how-we-started-a-1-5m-cane-sugar-biz-landing-our-product-in-whole-foods

-  
Scott Unkefer,   Founder of Just Panela LLC

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