Scott Meiklejohn: Hey, I'm Scotty from Recharge. On this episode, Hit Subscribe we're talking to Steve O'Dell, co-founder and CEO of Tenzo Tea. We chat with Steve about the serendipitous moments that led to founding Tenzo, the importance of using customer data to drive decisions, as well as how to bridge the gap between brand and community using authentic interactions. There's a lot to get to, so let's get started.
Scott Meiklejohn: Steve, thank you so much for joining us.
Steve O'Dell: How's it going, man? Thanks for having me.
Scott Meiklejohn: I'm excited to talk about Tenzo. So could you tell us a little bit about yourself and a little bit about Tenzo Tea?
Steve O'Dell: Yeah. So I'm one of the co-founders of Tenzo. We are a matcha brand. For everyone that doesn't know matcha, it's a green tea powder, come to made in lattes, teas, you can use it in smoothies, things like that. And it's super healthy. It has a little bit of caffeine and also healthy in eating.
Scott Meiklejohn: Could you walk me back a couple years ago, because you go to Japan and this is where it all comes down. Could you talk to me about some of these serendipitous moments where you're in Japan, the lead up to founding Tenzo Tea?
Steve O'Dell: Yep. So the quick origin story is one day I drank five cold brews and I was feeling crazy and-
Scott Meiklejohn: Check.
Steve O'Dell: ... my stomach felt bad. I was getting really bad anxiety and I kept feeling like, "Oh man, I wish I had another cold brew," but it just, it's like that cycle of ruined. And so I Google search what's the healthiest drink on the planet and found matcha. And then co-founder Robbie and I were like, "Oh, how do we buy this?" And it started with this guy who was private labeling tea in Arizona, very small. We bought 50 units and it was a couple hundred dollars and that's all we could buy. And then we were fortunate to go to Japan and try and meet some of these farmers. And on the last day when we were there, I was in the Kyoto train station, just Googling tea farms and shops nearby.
Steve O'Dell: And we went to one and then we stumbled into this 70-year old Japanese couple and with these very big American guys and coming in like, "Can we see the tea farms?" Just already crazy enough. And they didn't understand anything we were saying. So Robbie is doing sign language, "Let's just show taking a tea leaf," and that did not help. And I had Google translate going and that did not work. And then we're like, "Oh man, this is just not going to work." And so we started to walk to the next place, it was 20 minutes away. And 10 minutes into that walk, this black car pulls up right next to us, the driver's side window goes down and it's the old man that we just met in the shop.
Steve O'Dell: And he doesn't say anything. He just gives us this motion to get into his car. And so we hopped in his car and then for the next several hours, we visited a dozen or so tea farms all over Japan. And it was like this. I mean, it was like out of a Disney movie and that was everything we could have asked for, got ton of good content and it was a very good experience. And it felt like, "Wow. This is our destiny." And then after that, we were on the train ride back to Tokyo because we were flying out that day, and that guy's boss emailed us. And we explained like, "Hey, what we're doing..." And we met him several months later in Vegas at the world tea expo, in a very secret manner. And then yeah, he became our matcha supplier, he invested in the company. And after that we were like, "This is definitely our destiny to build the biggest matcha company in the world."
Scott Meiklejohn: Oh yeah. When you have all those things lining up and the stars are aligning, you got to run with it. You got to listen to the universe.
Steve O'Dell: Yeah. Exactly. So from there it's been... He's a super good dude. He's been super supportive and very lucky to have his partnership and blessed to have that experience.
Scott Meiklejohn: So when you're getting this off the ground, are you thinking, "We're going to sell this in stores. We're going to do direct to consumer," What was the game plan from the start?
Steve O'Dell: Yeah. So I had dropped out of UCLA to start. We didn't know, never taken a business class in my life. Co-founders also never taken a business class. We'd never even had real jobs. So we had pretty much no experience. Yeah, I mean we started... it made sense to sell DTC, right? It's a consumable that fits its way into habits and rituals that people have. And it's an upgraded version on the existing ritual of your morning coffee. And so we thought that would be a really good angle to start with. And we started in DTC, and we were trying to figure out how that even works. We are debating like, "Do you Shopify or WordPress?" Which is a crazy thing to think about now because it's so obvious. But just very beginner stuff like that.
Steve O'Dell: And each day we were working out of this coffee shop. So we were all living in this super tiny apartment. It was like, I was sleeping on the couch at this point and we had no space, that was essentially the issue. And we would walk a block to this cafe and work out there. And one day, we were leaving the coffee shop and we were just like, "Oh. Why don't we just try and sell matcha to the cafe?" And then it was like this boom light bulb moment. And so then we did, and then we eventually were like, "Okay. We don't necessarily know how to do DTC super well yet, but maybe these cafes are going to pick it up and they started picking it up," and eventually we brought it to hundreds of cafes in LA and it wasn't in any cafes yet in the US. It wasn't in Starbucks, it wasn't in Duncan, it wasn't in anywhere.
Steve O'Dell: And a lot of those early cafes picked it up and liked it. And then we would go on the weekends and just be out front making samples and educating people on how to make it and the benefits. And then, as the company grew DTC became a much bigger factor and a greater percentage of our total revenue.
Scott Meiklejohn: Before we jump in there, I just love to, I love asking these questions to founders and entrepreneurs. Can you remember the moment where you looked at your co-founder and you felt like, "Okay, I think we can do this. I think we're doing it." Is it like the 10th cafe that says yes, or is there anything that stands out to you?
Steve O'Dell: I don't know. I had this... This is a good founder little story. So I made this wooden plank and I hung it above my bed and it was number of Tenzo cafes. And it took a long time to get to one and then it took a shorter period of time to get to 10. And then all of a sudden, we were at 75 and I was... I think that was the moment when the board was fully filled up with little check marks. That I was like, "Oh man. This is going to be a real thing."
Scott Meiklejohn: That's so cool. So now you're moving into DTC and seeing that opportunity there, when you were thinking about that, were subscriptions part of that plan, or when did that come to play?
Steve O'Dell: Yeah, definitely subscriptions were key. I mean, when we first started, again, very similar questions, like we were Recharge or Bold, and I think we tested out the other one for two weeks and then it just didn't work at all. And then we had to switch to Recharge and then thankfully your team was actually super helpful in getting that off the ground. And that's been a key thing for us for a number of years now.
Scott Meiklejohn: I love to hear that. And I know in an earlier call when we were talking, you said the pandemic accelerated things for you. What's growth been like over the last two years for you guys? At least from the DTC perspective?
Steve O'Dell: Yeah. So the pandemic was like, it was early March, we had a call with our other board member, this guy named Justin Blaine, shout out to Justin. And basically the whole world was crashing around us, all the cafes closed. And at that point, our wholesale business was 10 times larger than DTC. And he was like, "Guys, if we're going to keep growing the company, we need to make a switch and we need to switch right now." And at that point, we are maybe doing, I don't know, 10,000 a month in DTC, 50% of that was subscription, so extremely small numbers. And yeah, I mean, in the last... Since what has that been like? Two and a half years now, maybe three years. It's been amazing. We've like 30 acts, our DTC business, on a monthly revenue type thing. And it's been super helpful.
Steve O'Dell: I've learned a lot on some of the things. We can chat about in a second here, but that's been our bread and butter for the last several years now. And DTC is just so, it's... So it was a massive percentage of our total revenue last year, so it's good.
Scott Meiklejohn: Oh, no, sorry, go for it.
Steve O'Dell: No, I was just saying, and there's these... The comparables are athletic greens is doing 120 million a year, something crazy. It's like they're a single product powder, very similar to Tenzo. It's like if we hit on a lot of those same themes from a cost standpoint, LTVs, and it's like, we just got to keep driving that and growing the business.
Scott Meiklejohn: Yeah. Let's talk about that a bit, because I'd love to talk about your retention efforts, your retention strategies. We were talking earlier in another call. I just loved hearing about this, how you were leaning into data and plugging in a bunch of different data points and allowing that to guide you without giving away anything you don't want to. Could you tell us a little bit about some of the data you guys use to make sure you're following the right steps for attention?
Steve O'Dell: Yeah, for sure. For all the founders listening to this, the data is the most essential part of e-com. And once you have a very clean system of getting all the data and analyzing the data, then you can make the decisions in your ecommerce engine. Let's say just a word for full funnel experience to manipulate that data in your favor. And so the key one to start is what is your margin, and what is your payback period? Are you going to be profitable on first purchase? And if subscription, how long? Do you need to retain a customer to pay off the money you spent on the product and the acquisition cost? So those are the base bone, but then it's like... Well, Tenzo did, which I think really helped us get from say 50k a month to 250,000 a month.
Steve O'Dell: The key point there was we built out a custom dashboard that piped in everything in the ecommerce engine. So that was all of the Klaviyo flows, all the Shopify data, all the Recharge data, the SMS data, the reviews data, Google analytics, all of our media spends, TikTok, Facebook, Pinterest, Snapchat, everything is piping into this database, right? And then from there, what we did was we did an analysis called Optimal Binning, which essentially we were like, "All right, what is the path that the customers took that had the highest LTV?" And then all these different bins, which are the level of customers, your highest quality customers, they took this series of steps, a middle tier set of customers took this series of steps. And then what we figured out, it was like, "Oh, if we upsell this product, those customers have a higher LTV."
Steve O'Dell: And so then we optimize all of our upsells based on the ones that have the highest LTVs. Another really good lesson was we looked at using our data from our 3PL, it was how long does it take for a customer to get their order? And what we realized was that customers that got their order in under six days had a significantly higher LTV than customers that took over six days. And there's all these like, you can think about why that is, but we just really were like, "All right, let's just follow the data on this one." And then we optimized just all the things on that note and our retention numbers grew a lot, which meant that we could spend more money on paid ads. And essentially you can outbid all of your competitors, if you can spend more money on the ads.
Scott Meiklejohn: Yeah. And that flywheel just keeps on going, eh? It just keeps going on and on.
Steve O'Dell: Yeah. And then it's like, "Okay," then you get more data and analyze it in better ways. It's stronger. And yeah, it just builds this flywheel that's really, really powerful, especially for subscription businesses.
Scott Meiklejohn: Something I really loved about Tenzo tea, and you can tell me if this is one of these things you developed over time. I'm sure it is. But was the trial kit itself, for those who don't know, you guys provide this Tenzo trial kit, which has got the whisk, it's got the powder, it's got the instruction manuals and how to do this, was that always part of the plan or was that something you guys recognized? Like, "We need to provide a little more supplemental contents to really hook people on this ritual."
Steve O'Dell: Yeah, that was actually a big one. So the first part about the trial kit was like, "What goes in the kit?" And going back to that same retention study we did, we analyzed the trial kit. And so we made all these different kits. We made one that had just a shaker bottle, it's like this, but as much in it. The other one had the electric frother and the other one had the bamboo whisk. And we sold them identically to thousands of customers. And we looked at their retention curves for each of those, and the electric frother had the best one. So then we figured out that's how we nailed down items. And then secondly, we did a study that's like, "All right, there's all these items, what happens if we improve one of the items?"
Steve O'Dell: So before we were buying the frothers that weren't custom branded, our tins were also, they used to have a sticker on it. And it's like, we took the tins, instead of putting a sticker on, we did a full production rod in China to get custom-made tins. So then we have tins skew one versus the old one tins skew zero. And what we noticed was that tins skew one also had better retention than tins skew zero. So then it's like, we have this cycle of product development where if you improve the aesthetic of the products, their attention gets better. So that just keeps pushing us down, this funnel of optimizing for LTV and higher retention.
Scott Meiklejohn: I love that. And just how data driven that is and just, yeah like you said earlier, just following the numbers and continuing to iterate and innovate off it. It's just awesome.
Steve O'Dell: Yeah. That's ecommerce. Yeah, [inaudible 00:14:18].
Scott Meiklejohn: In a nutshell. Let's talk a little bit about community building, something I love that you guys do. So you got this Facebook group, you have a lot of likes on Facebook obviously, but deeper in the Facebook group is this 1600 plus member, private Facebook group, this community group that you've developed. So could you tell me a little bit about the origins of that and how you cultivate community inside that?
Steve O'Dell: Yeah. So again, this goes back to retention. I'm sorry to just keep going on that.
Scott Meiklejohn: No. Do it.
Steve O'Dell: But it's like, that is a way for us to engage our subscribers, for them to feel like they're a part of the brand. And in that group, we share recipes, advice on how to use matcha, we answer questions, we send them polls, and learn about our customers and get to know them. And every week, we send out a welcome message that's like, "Hey, welcome to the 30 new people, the hundred new people into the group." And then my co-founder and I, Rob and our community manager will go in and we will comment like, "Hey, nice to meet you," or, "I know someone that lives in that city," like, "I've been there," whatever it is that we're talking about. But yeah, and then it also bridges that gap between a brand speaking to an audience, which I think is one way to look at it. It's a lower tier version of a community. And really, the magic happens in a community when the members get to meet each other and know each other, learn about the products. They just learn about living a healthy style and being better, and what that's like,
Scott Meiklejohn: I love you talking about the effort there, because it's one thing just to be like, "Hey, welcome." But to actually provide a genuine message, you just get so much more. This is now looking at it from a business, but you get so much more return on investment when you're actually providing a genuine message to these people. So they feel like they are part of a community and not just a brand's Facebook group.
Steve O'Dell: Yeah, exactly. And I mean, most Facebook groups are, frankly, they suck and they're dead. And if you want to really create that magic, you really, you need to be active. And we get so many posts every single day. Every hour, people are just blowing it up with all these different things. So you got to do it, otherwise it's just a waste.
Scott Meiklejohn: Let's flip over to Instagram. I know TikTok's on the rise too, for you guys. Instagram, 42,000 followers and counting, no small numbers here. Could you talk a little bit about the power of UGC and maybe how you guys leverage that content?
Steve O'Dell: Yeah. UGC, you got to love it. I think that's the most important to have a content. And a lot of posts on Instagram are really just trending to become like this. Just like visual billboard, digital billboard, I guess, of highly aesthetic content. But the bread and butter is really partnering with influencers and regular people to just create very simple, I don't want to say, but low quality for some of them, just very organic content. And I think why that really sticks well is because it speaks to the customer and they don't feel like this is a Coca-Cola or Nike ad. It's just someone that's like me. And I'm saying that not me specifically, but anyone, if you watch a video it's very relatable, believable, and those types of things really build trust in the way that a highly produced video or image doesn't.
Scott Meiklejohn: I totally agree. You're seeing that rise so much in constant over the last couple years, in terms of commonality, it being authentic. These polished videos, they don't perform as well because people just, like you said, don't see themselves in it. I just saw one today, one of your latest ones and it was just someone literally in workout gear, showing the start of their day with Tenzo tea. And it's just awesome. Just like a quick little thing, easy, boom, it goes up and gets the likes and traction. Yeah, it's really great to see.
Steve O'Dell: Exactly. Yeah. And I think, just take that one step further. TikTok is even more organic. It's like you really... TikTok to be successful, you want a 22-year old college kid to show why they like Tenzo and do it in a very funny, organic way in their dorm room. And that's what really sticks, it's far less produced.
Scott Meiklejohn: Yeah. It's hilarious. When I started on TikTok, I was trying to make things polished and seamless, just bringing in film school quality stuff. And like, that's not what necessarily does well, it's shooting on your phone, just like you said. Like using the music, using these trending sounds and voiceovers and that's how it feeds the algorithm and goes from there.
Steve O'Dell: You should just do a video with your iPhone about all the equipment you're using to make actually highly produced videos, and that would probably do great.
Scott Meiklejohn: A hundred percent. It would do much better than anything else. You touched on it here, but I would just love to hear from your perspective as well, from your own blog, from your own site, what content have you noticed that performs the best? Listen, I'm just going to give you the answer because I saw it and you guys are killing it with recipe piece. I feel like that's such a great way for you guys to connect with customers.
Steve O'Dell: Yeah. Recipes kill it. And we started really diving this in three years ago at this point. And how we did that was we looked at 100 historical emails and we analyzed open rates and clickthrough rates and stuff like that. And recipes won by far. And then that became this backbone of content for us. It goes in the blog, it goes in the emails and it also is a very educational thing with a food product. Because if you don't know matcha isn't just for lattes. I was in Pittsburgh last weekend, had a few friends over and we made cocktails. And matcha cocktails are great, and you can also put it in pastries. And my mom uses it during St Patty's day and other holidays to make frosting green. So just educating customers about that and the ways that they can use it is a very powerful thing. And a lot of people in our community really enjoy that type of content.
Scott Meiklejohn: Yeah. I've had a matcha cookie before, very delicious, definitely recommend it.
Steve O'Dell: Exactly.
Scott Meiklejohn: Let me throw some rapid fire questions at you before we close this thing out. What advice would you give to a subscription brand that's just launching out, has no subscribers, but it's thinking subscription might be good for their brand?
Steve O'Dell: Subscription is great for your brand, definitely do it. And make sure you have basic systems for understanding the data right away, LTV, 30, 60, 90-day payback periods, that thing. And then test as much as you can to improve that over time.
Scott Meiklejohn: All right, now you're a subscription run, you got maybe a thousand followers, sorry, subscribers, maybe 10,000 subscribers, what advice would you give to try and help them scale and continue to grow?
Steve O'Dell: Honestly, double down on data, follow their retention, example I gave earlier. And then once you know that, figure out your allowable ad spend and spend as aggressively as possible.
Scott Meiklejohn: Last one, very basic. What physical subscription products do you subscribe to?
Steve O'Dell: Want to shout out Paul Voge, the founder of Aura Bora. They are a weird water company and yeah, I love their products, great for everything and shout out to Paul and the team there.
Scott Meiklejohn: Love it.
Scott Meiklejohn: Well, Steve, thank you so much for spending the time with us today and we wish you and Tenzo Tea the best of luck for the rest of the year.
Steve O'Dell: Thanks a lot. Appreciate the time as well.
Scott Meiklejohn: We'd like to thank Steve once again for joining us. If you're interested in Tenzo Tea, head over to tenzotea.co, and if you're looking for more of our episodes, check us out at rechargepayments.com/hitsubscribe.