Unpacking FABRIC's Mission: Unf*ck Tomorrow | Tom Eddleston | FABRIC | Profits on Purpose

Episode Description

In this episode of the Profits on Purpose podcast, host Nate Littlewood interviews Tom Eddleston, co-founder of FABRIC, an innovative beverage company focused on hemp-derived, non-alcoholic drinks. They discuss the brand's mission to promote mental health, the challenges of navigating the hemp beverage landscape, and the importance of compliance and long-term strategy in a rapidly evolving market. Tom shares insights on balancing profit with purpose, the significance of their provocative tagline, and the lessons learned from their entrepreneurial journey.

Key Takeaways

• Fabric is on a mission to 'unf*ck tomorrow' by promoting mental health initiatives.
• The brand positions itself at the intersection of functional beverages and non-alcoholic beer.
• Trends show a significant decline in alcohol consumption among Americans.
• The tagline 'unf*ck tomorrow' resonates with consumers and encourages brand loyalty.
• Mental health is a personal and societal issue for the founders of Fabric.
• The company is legally obligated to consider societal impact alongside financial goals.
• Navigating the hemp beverage market requires a compliance-heavy approach.
• The go-to-market strategy includes a focus on omni-channel distribution.
• Financing is crucial, and the founders emphasize capital efficiency.
• Lessons learned include the importance of discernment in choosing consultants and advisors.

See More from Tom and FABRIC

• LinkedIn
• FABRIC's official website 

Listen to the full episode to discover how Tom's experiences can inspire and guide you on your entrepreneurial journey. Don't forget to subscribe for more insightful conversations!

I hope you enjoy this episode!

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– Nate and the Profits on Purpose podcast team

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Transcript

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00:00 Introduction to Fabric and Its Mission
01:58 Brand Positioning and Unique Selling Proposition
05:16 Trends in Alcohol Consumption
07:55 The Provocative Tagline: Unf*ck Tomorrow
10:23 The Importance of Mental Health Initiatives
13:59 Balancing Profit and Purpose
17:05 Navigating the Hemp Beverage Landscape
19:46 Compliance and Long-Term Strategy
25:48 Go-to-Market Strategy and Distribution
30:27 Financing and Capital Efficiency
36:12 Lessons Learned and Reflections

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Nate (00:01)
Welcome back to the Profits on Purpose podcast, where we explore the journeys of purpose led founders and the financial strategies that have helped them survive and thrive. I'm your host, Nate Littlewood. And today's guest is Tom Eddleston, who's the co-founder of Fabric, which is an Aussie born, US crafted beverage company on a mission, as they put it, to unf*ck tomorrow.

Fabric blends the ritual of beer with modern alternatives. Think hop forward, non alcoholic and hemp derived beverages built with premium Aussie ingredients and a public benefit mandate. They've even pledged 2 % to mental health initiatives, putting margin where their mission is. Tom, welcome to the show. It's great to have you here.

Tom Eddleston (00:54)
Cheers, Nate. Thanks for having me.

Nate (00:56)
Of course. Well, Tom, I'd love to get started. Just talking a little bit about positioning of the brand. This is a really interesting business that you're building here. You've kind of positioned the company at the intersection of functional beverages, obviously non-alcoholic beer and also hemp. Given the multiple angles and dimensions to the brand, I'm curious how you kind of think about

communicating the unique selling proposition to customers. And is there such thing as, I guess, a hierarchy of benefits that you think about when you're introducing people to the company?

Tom Eddleston (01:37)
Yeah, it's a great question. And yes, we are kind of sitting at this nexus of three brewing categories. Obviously non-alcoholic beer in general is blowing up in the US. We saw athletic brewing has really been just a meteoric rise. And yet it's still, it's total sales pale in comparison to non-alcoholic beer in across the EU, for instance. Then the functional

beverage category is exploding as well and then hemp beverage I would say is totally nascent a little obscure at the moment just because of the regulatory patchwork and a lot of people just have no familiarity with this category which is really THC in beverage format so something that has been relegated to the walls of dispensaries for a very long time is now available in liquor stores over the bar and even

grocery stores across the country and its prevalence really just depends on which state you're in. So there is a lot to communicate here and we felt that with Fabric we wanted to kind of tap into those different trends. think that function as far as feeling something is really really important and it's what a lot of non-alcoholic beer So a lot of people will have the feedback of non-alcoholic beer why bother.

Nate (03:02)
Mm-hmm.

Tom Eddleston (03:07)
So when you use either conventional functional ingredients or hemp derived cannabinoids, you can really tailor the experience. And so as far as the hierarchy goes, I think that there absolutely is a hierarchy and that we do have a lot of differentiators that we're trying to...

Nate (03:07)
Right.

Tom Eddleston (03:31)
in part upon the customer, but most importantly is taste and ritual. I think that, you know, that is really like the entry hook is saying that we're beer adjacent, we can replace something that is a familiar routine for you. And we can do so in a way that's zero calorie, zero sugar.

Nate (03:42)
Mm-hmm.

Mm-hmm.

Tom Eddleston (03:52)
As far as the next ladder down, think the functional draw, so being able to feel something. We have unique cannabinoids tailored to the experience. And so our kind of flagship product is low dose and drinks just like a beer. you you're getting a buzz. It's just coming from THC rather than alcohol. And then once someone has picked up the can and maybe they've taken it home and they're having a read of the label, what we

Nate (04:14)
Mm-hmm.

Tom Eddleston (04:22)
to do is for that person to become either intrigued or loyal to the company by saying, wow these guys are doing some interesting things. It's unique Australian ingredients, it is you know a hop varietal that is native to Australia and as you mentioned 2 % to mental health.

Nate (04:32)
Mm-hmm

Yeah, interesting. There's a lot of dimensions to this.

Well, Tom, you and I share the reality that we're both Aussie males and I'm not sure about your childhood, but certainly growing up for me, know, beer and drinking culture was a big part of how I connected, you know, with with my mates and circle of friends. I assume you're aware or you've seen some of the stats out recently. I think it was from a group called Gallup looking at the number of Americans that are actually consuming alcohol on a

basis. And I got to say, it's amazing how quickly this is moving. According to this data set in 2021, 67 % of Americans said that they drank alcohol regularly. In 2024, it was only 54%. That's a 13 % drop in the space of only a few years. Do you have a view on kind of where this is going? You know, where we might be headed to in terms of alcohol consumption as a society?

Ready?

Tom Eddleston (05:49)
Yeah, I think that the stats speak for themselves that every generation is drinking less alcohol. I think another interesting stat on top of that you mentioned is that 50 % of American adults are actively looking to curb their alcohol intake. And...

You know, we can speculate as to why that is. I don't think it's any surprise that we've had the Surgeon General come out and say that alcohol should be labeled a carcinogenic, which is what it is. And that many people are just more health conscious. They're more aware of what they're putting into their bodies. And that's just, that's not just alcohol. That's across the board. I personally feel like there was a lot of people who reassessed their drinking habits and their

Nate (06:22)
Mm-hmm. Mm-hmm.

Tom Eddleston (06:42)
relationship with alcohol coming out of COVID. Certainly speaking from personal experience, that was me. I was having happy hour at 3 p.m. every day during that lockdown period and probably overdid it and then looked to...

Nate (06:44)
Mm-hmm. Yeah.

Interesting. Uh-huh.

Yeah.

Tom Eddleston (07:00)
probably overindex and say I'm gonna cut back alcohol entirely. mean, personally, I still drink, but on the wrong side of 35, it is just now for me, two beers, I'll feel the next day. if you are wearing a smartwatch, you are more than aware of the impact it has on your sleep. And so the buzz that I used to enjoy so much and the ritual that you talk about,

Nate (07:06)
Mm-hmm.

Yeah.

Tom Eddleston (07:31)
catching up with mates over a beer, what we're trying to do is just pioneer a new way to connect maybe without some of the downsides of alcohol.

Nate (07:31)
Mm-hmm. Mm-hmm.

Yeah. Yeah. Interesting. Well, let's talk about.

the brand positioning here, you've got a rather shall we say provocative tagline here, which is unf*ck tomorrow, which is not just a little provocative, but it's also quite memorable, I think. And it's also kind of multi-dimensional in terms of how you could interpret that. I'm curious how you went about testing that in terms of the demand pull that it created and the strength that it has in terms of attracting

people to the brand and the product, versus the potential downsides that it may represent or the challenges that it could represent, be it through relationships with regulators, distributors or mainstream retailers. How did you think about structuring that brand slogan? And is there anything that might encourage you to tone it down a little bit?

Tom Eddleston (08:43)
Yeah, it's one that we felt really...

captures a lot in really two words. So of course we've mentioned that we have this mental health angle. We've mentioned that the no hangover kind of element of consuming hemp beverage versus alcohol. so unf*ck tomorrow to us felt like it can be very ambiguous, open to interpretation in a good way. And that can either be societally or otherwise. And candidly, I think right.

Nate (08:52)
Hmm.

Tom Eddleston (09:18)
now that the US there are a lot of people who are very disenfranchised and that there is a lot of discontent and so for

a lot of people, really resonates. as far as trialing that, you know, we polled, I'd love to say that we were more sophisticated than we were, but it was really a matter of running it by friends and family and kind of dropping it on people to see how they reacted and just gauging their, their life response. I would say overwhelmingly, even including like quite conservative boomers or parents,

Nate (09:34)
Yeah.

Tom Eddleston (10:01)
that the response was I love it and You know some people felt it was a little too out there, but as far as Distilling that message and making it a little more shelf friendly for You know a grocery store for instance all we did was abbreviate and so unf*ck tomorrow becomes UNFK TMRW that

Nate (10:05)
Yeah.

Tom Eddleston (10:30)
when read, though abbreviated like that, becomes cryptic enough that it's almost a bit of like an insider tagline. So if someone has seen that on our website or on our t-shirts, they know it immediately. But for a 10-year-old kid who happens to see it in the grocery store aisle or distributor, for instance, they have no idea. And so that's kind

Nate (10:39)
Yeah.

Mm-hmm. Yeah.

Tom Eddleston (11:00)
been an easy way for us to get around it. And when we explain to them what it means, they're usually on board as well. They kind of like the tongue-in-cheek play. And like us, they feel that it kind of captures the essence of what we're trying to do.

Nate (11:04)
Mm-hmm.

Mm-hmm.

Yeah.

Very nice, cool. Well, I wanna talk a little bit about the mission here and your 2 % pledge towards mental health. Can you tell me why was that mission important to you? I mean, why is supporting this an important thing for you and the brand to be doing?

Tom Eddleston (11:38)
Yeah, so it's myself and two co-founders and we kind of all have our own stories and experiences around mental health. But for me, my dad had a mental illness and ultimately that led to him taking his life. So it was something that was pretty transformative in my life at a young age. I was 20 years old. so something that I was just have always been very much aware of

Nate (12:03)
Mm-hmm.

Tom Eddleston (12:08)
is...

mental health, both my own and those my friends and family. And it's something that growing up as Aussies, you know, in Australia, there was a lot of the culture was, you know, we bury our feelings, we don't address it, we don't talk about it. And I like to think that the world has evolved, and that a lot of people are more willing to seek help and speak out. But the stats are still horrific as it

Nate (12:14)
Mm-hmm.

Tom Eddleston (12:40)
pertains to you know mental health outcomes in the US have never been worse suicide remains a huge problem and For us we're not necessarily Trying to say you need to do everything perfectly We are more of a brand that's focused on the small rituals the small way that you can You know unf*ck your tomorrow. What are you doing? That is help

Nate (12:48)
Mm-hmm.

Tom Eddleston (13:10)
helping you lead a better life. And for some people that'll be drinking less alcohol, for some that'll be substituting THC for alcohol where they may sleep better, not have the lingering effects the following day. And yeah, for others it's just trying to get outdoors. It is reconnecting with friends. And I think, unfortunately, one thing that happens when you do curb your drinking is that is a huge social outlet for a lot of people. And so the time that you spend at a bar interacting with strangers in like a real community environment is also impacted. And so...

Tom Eddleston (13:56)
Yeah, we are certainly not preachy. That's not our brands. That's not us. But what we are trying to do is encourage people to just check in with themselves and their friends and just have a little think about what are the small things they can do to improve those outcomes.

Nate (14:00)
Yeah,

I love it. I love it. That's really cool. I'm curious how

how much analysis or thought went into the actual 2 % number. As I think you know, my day job is working with early stage brands as a fractional CFO. So I spend a lot of time looking at their financials and it's, you know, not unusual to see a, you know, a profit margin for businesses like this in maybe the, you know, five to say 15 % type range. So what we're potentially talking about here,

like 2 % of revenue, it could be, you know, 20, 25 % of the profit of the company. And if you think about, you know, valuation of these businesses, which is commonly tied to the profit that they generate, if 2 % is going away to a pledge like this, there's presumably some sort of valuation impact. I'm wondering what sorts of conversations you guys might've had internally about, you know, taking that

financial hit in order to support a mission, which is, you know, for great reason, very important to you, versus, you know, some of the financial obstacles or valuation obstacles that it could potentially represent for the business longer term.

Tom Eddleston (15:36)
Yeah, it's a great question and it was certainly something that we didn't take lightly. But for the three of us, we felt that...

Nate (15:44)
Mm-hmm.

Tom Eddleston (15:50)
finding this nexus of profit and purpose and kind of proving out this model is something we felt very strongly about. We legally incorporated as a public benefit corporation. So we actually have a legal obligation to consider, you know, societal impact alongside financial and a requirement of that is to have a philanthropic angle. So we're already looking at, you know, a lot of brands will do 1 % for the planet.

Tom Eddleston (16:20)
and there are some excellent initiatives where they're revenue.

We saw that as the baseline and really wanted to go above and beyond. And we're not naive enough to think that brands will purchase our product exclusively for this, but we think it is one of the many kind of differentiators that tells people that we're not just another brand. We do give a shit and we're willing to put our money where our mouth is.

Tom Eddleston (16:54)
Candlely some of the alternatives. I see a lot of brands that will do things like 10 % of profits. But as you know, Nate, as an early stage CPG company, especially in beverage, a lot of this business is so capital intensive that brands will run for years without even breaking even, let alone producing any meaningful profit. And so that felt totally disingenuous and that it was a claim that was no substance. And I couldn't stand the idea

Nate (17:09)
Mm-hmm. Yeah.

Tom Eddleston (17:29)
of someone coming to us after two years of operating and said, you give 10 % of profits, that's amazing. What causes have you given to? us saying, well, we yet to donate a dollar. And so yeah, it is something that we felt we've got to put our money where our mouth is. And we actually.

Tom Eddleston (17:50)
are even looking at ways that we can go above and beyond that. So we're looking at a DTC launch in October and we are currently looking to identify a charity partner and the first 10,000 cans that we produced, our idea is that we would like to do 100 % of proceeds to that organization. And so this is again where from a purely financial perspective that is foregone revenue and it's a big cost to us at a time when we could really use it. But my bet is that this will have a disproportionate impact on our DTC business. It will stand to generate earned media. It will help us drive organic reach that will far and away

It'll be completely disproportionate relative to throwing some dollars at meta ads and hoping that that sticks. yeah, we think that it will resonate with people and are willing to make that bet.

Nate (18:55)
Yeah, interesting. So hypothetically...

What would you say to a customer who said, hey, instead of charging me 50 bucks for a case pack or card and whatever it comes in, instead of charging me 50 bucks, just charge me 2 % less and make it 49 because I don't want to support the philanthropic angle to the business. Have you thought about how you might engage a customer when and if that situation were to arise?

Tom Eddleston (19:38)
Candidly no, really because I think that that's just not our customer. it's not something, I mean, it is on the back of our can, the 2%, but it's not something that is plastered all over the front of the can. And we think it's really, it's kind of going back to that hierarchy of you've got to really like the taste, you've got to really like the brands, it's got to fit an occasion for you.

Nate (19:43)
Yeah.

Yeah.

Tom Eddleston (20:08)
After that, if you happen to acknowledge that we give 2 % of revenue, if that's something that you find value in, amazing, if you don't, you probably just overlook it and keep going.

Nate (20:13)
Mm-hmm.

Yep. Yep.

Tom Eddleston (20:22)
And in a space that's getting increasingly crowded, there are plenty of other alternatives. But yeah, we think that the people that this does reach, are a lot of, I think most people would be lying if they said they hadn't been impacted by mental health in one way or another.

Nate (20:28)
Sure.

Yeah, yeah, totally. That makes a lot of sense. Thank you. Well, I wanted to talk a little bit about...

opportunity versus discipline. So I'm by no means an expert, but my understanding is that the hemp space at the moment is a bit of a wild, wild west. there's a bit of a, you know, a lot of folks essentially going on a, on a cash grab and a money grab. It's incredibly fragmented from my perspective. It seems like every state has slightly different rules and it's, it must be mind numbing to keep up with all the changes and you know, the way that regular

I understand that you have taken quite an intentional approach to this in terms of looking at lower doses, having a quality first approach. And from what I recall from our conversation the other day, I think you mentioned that you're having a fairly compliance heavy approach to this, which I presume means it's harder for you to participate in this short term.

kind of opportunistic cash grab that a lot of the industry is participating in. And you're, guess, going for more of a slow steady burn. Can you talk me through, firstly, I guess, have I got that correct? And secondly, if I have, can you talk me through the decision framework that basically got you to that point?

Tom Eddleston (22:09)
Yeah, sure, think.

you hit the nail on the head. It is a wild west dynamic out there at the moment. And we're talking about a federally legal product that has been subject to state level rules and regs across the country. So exactly to your point, it's a total patchwork of regulation and some states will permit 20 to 30 milligram products, not just beverage, but any kind of THC products

so long as it is hemp derived to be sold.

Nate (22:43)
Mm-hmm.

Tom Eddleston (22:45)
Others like California have banned it outright. then states like Colorado, where I sit have, as soon as this, they saw this coming, we have a regulated dispensary model here in Colorado and they sought to protect the dispensaries by really limiting the dosage. So the maximum dosage cap in Colorado is 1.75 milligrams. And if you go a state over in most directions, it is Wild West. So Nebraska, you can order 10 milligram cans over the bar. And at breweries, you can pick up a four pack of 10 milligram cans to go.

Also, I think it worth noting is that there is an absence of large scale, you know, Bev Alk players at the moment. And that is because they're not willing to invest the CapEx dollars when you have this looming question mark on the industry. They're waiting for more clearer federal guidance before they jump in. And so that's meant that it is a...

Tom Eddleston (23:56)
anyone and everyone can jump into this category, put some THC in a seltzer water and you're on shelves and selling. And the relative novelty of the category has meant that that's all you have to do. If you are on shelves, you probably will sell. And we saw that and thought,

A lot of these brands are meeting the market where it's at today. They're trying to do the maximum legal dosage in a can and for high use consumers, that represents a great value play. And that could be sold online, shipped to your door and suddenly you got weed in a can arriving at your doorstep for the first time in your life. so, yeah, we...

Nate (24:24)
Mm-hmm.

Yeah.

Mm-hmm.

Tom Eddleston (24:44)
chose to stick to low dose. And I should, when I say low dose, really the industry typically refers to anything from one to five milligrams as low dose. We're not exclusively low dose. We also do a 10 milligram can. And part of the rationale there is that that is the top seller across the country right now is 10 milligrams.

Tom Eddleston (25:13)
And it makes sense. A lot of the early adopters are people familiar with THC and they see this as an alternative to smoking a joint and they can get it again shipped to their door. But our flagship skew, excuse me, is our 1.5 milligram. And part of the reason for going that direction was one, it's what's compliance in Colorado is it enables us to participate here in a market where there are only four or five brands actively selling. Whereas if we look at some of the states that have fully embraced this space like Minnesota, there's around 300 brands competing for three, yeah, it is. I mean,

Nate (25:59)
300? Wow! That is insane.

Tom Eddleston (26:07)
Minnesota is a really interesting market to watch. was one that established a regulatory framework that said anything up to 10 milligrams can be sold in liquor stores, at bars, gas stations, really anywhere and everywhere. And so in some liquor stores throughout Minnesota, THC now represents 15 to 20 % of sales, which is incredible. Yeah, it is...

Nate (26:22)
Mm-hmm.

Yeah.

Tom Eddleston (26:36)
So, then you look at California where it's banned outright and no one has any awareness this category exists. so Colorado, funnily enough, given the low dose has very little category awareness as well. So firstly, we saw that as being a huge opportunity and that with a beverage that our target occasion is anytime you would reach for a beer, you can reach for a 1.5 milligram hemp beverage.

Nate (26:44)
Mm-hmm.

Yeah, yeah, yeah, yeah.

Tom Eddleston (27:08)
without any of the calories, sugar, or destroyed sleep. And so, yeah, we are very intentional about playing in this market. Also, I think...

Tom Eddleston (27:25)
Where we're trying to go is meet the market where it's going rather than where it is today. And we see that, know, bed out players are sitting on the sidelines looking to jump in and grocery stores, which do huge volumes of any beer and hemp beverage in the U.S. grocery stores are going to be a massive channel for us. And we hear constantly from distributors and buyers that what they're looking for is a consistent

Tom Eddleston (27:55)

Consistency is key to them. They need to understand the chain of custody and by that I mean where was the hemp grown, what was the supply chain, documentation, rigorous documentation at each step of the way.

Tom Eddleston (28:14)
And so we really saw an opportunity to say, hey, we want to build for Whole Foods. We want to be the brand that ticks every regulatory box and get ahead of where the market's going. And we think by doing so, that is going to open doors for us that others get shut out of because they're pursuing short-term profits.

Nate (28:20)
Interesting, interesting.

Tom Eddleston (28:37)
Yeah, and I would say that's playing out. We're having conversations with some of the largest beer distributors in the country, and it's music to their ears that we are taking a level of self-regulation and compliance that others are simply chasing the quick buck.

Nate (28:40)
Yeah. think they call that playing the long game, Tom. Yeah.

Tom Eddleston (29:00)
That is exactly right that's a much more articulate way of explaining what we're trying to do here

Nate (29:05)
Got it, got it. Well...

As a fractional CFO who works with a lot of e-com and consumer brands, a topic that I find myself talking about fairly frequently is channel strategy and go-to-market strategy. Now, usually if a brand was looking at expanding into retailers, they would pick kind of a region and go after a demographic that was kind of aligned with their brand and their product and so forth. They might look to set up a distributor relationship

a certain part of the country. And maybe they would work with a salesperson or a broker who specializes in that region.

I would love to understand a little bit more about your go-to-market plans here. Given the very, very uncertain and it seems rapidly changing regulatory landscape here, how are you thinking about, you know, the retail strategy? What does the right approach look like for all the different types of retailers? I mean, there's obviously alcohol stores. You mentioned supermarkets just now. You have got a D2C launch.

I think you said October, so just around the corner. Might even be the past by the time this podcast is out. there's a few different interesting channel options here. How are you thinking about kind of the ordering and sequencing of these?

Tom Eddleston (30:35)
It's a great question and it is something that we spend a lot of time thinking about.

because we have this really unique opportunity right now where we are at the ground floor of a category that is poised to be one of the fastest growing adult beverage categories ever. so with a little more regulatory certainty, we think that the big BebAlk players will move in a big way. And...

Nate (31:06)
Mm-hmm.

Tom Eddleston (31:09)
I think that's going to result in a lot of consolidation. We're going to see a lot of margin erosion. so really we're kind of thinking about first, if that's to happen, what differentiates a good brand from great and who gets the distribution opportunities with some of the biggest distributors versus those who get relegated to a smaller regional market.

they become just a small regional player. And so thinking about channels as well as capital constraints, it's...

Nate (31:49)
Yeah, well I'm going to come to that next.

We're going to talk about the dollars shortly.

Tom Eddleston (31:51)
Yeah, yes. So it's a constant challenge because in some ways conventional wisdom in beverage and CPG is deep, not wide, going really deep into one market and trying to demonstrate that you've found product market fit, that you are showing real velocity and repurchase and then expanding outwards from there. In this space, given the pace that it's moving, we think you need to be omni-channel from day one. And so we have a distributor here in Colorado who is pushing out our hemp beverage products. As you mentioned, we have our forthcoming DTC launch. But one thing, I think another differentiator for us is that we have a non-infused functional product. So we have a beverage that we can sell anywhere and everywhere.

Tom Eddleston (32:48)
that enables, it's kind of like our Trojan horse. We have a, a functional product that we can sell on Amazon, that we can sell, in any number of big box retailers across the country and that that can really seed those accounts for us. And especially with accounts that are a little skeptical of hemp beverage or a bit mindful of the optics. You know, a lot of people are like, it's what, what's the PR implications of me carrying THC?

And so we are trying to say, we've got an offering for you and be actively playing in that space.

Nate (33:19)
Right, right.

Mm-hmm.

Tom Eddleston (33:29)
channels, we're more interested in trying to find the right major distributors and the guys that we can scale with in a big way than we are doing kind of a land grab right now. And it's again, the playing the long game here, we think that the big distributors are going to create portfolios of five to six brands and are going to push those out anywhere and everywhere. Our goal is to be one of those five to six brands.

Tom Eddleston (33:59)
with a powerhouse national beer distributor rather than have a book of 20 distributors around the country who are doing it in a more scrappy way.

Nate (34:12)
Gotcha, gotcha, interesting. So I guess this is a great segue into what I wanted to ask next, which is about financing and funding. As you know, and you're from a bit of a finance background originally as well, from what I understand. Is that right? Yeah, yeah.

Tom Eddleston (34:27)
Yeah, yeah, yeah, that's right.

I spent the last 10 years in real estate private equity.

Nate (34:32)
Okay, okay, so you know your way around a set of financials in your...

very aware, I presume, of just how notoriously expensive physical product companies can be to launch. Some of the channels that we've been talking about today, they can require so much capital in terms of putting free fills and promotions and coupons and everything that's needed to basically build them out that they can actually take many, many years before they start returning cash to you.

you understand what's going through your head in terms of financing and funding the business? Like how have you financed it thus far? What do you think the financing needs are gonna look like for the business over the next couple of years? And what are maybe some of the contingency plans that you have in place here? Like if we get this financing, then we'll take this go-to-market strategy, or if we only get this financing, then we might have to take this strategy again.

I'm curious how you're thinking about fitting some of these pieces together.

Tom Eddleston (35:42)
Yeah, that's another great question that is always top of mind. I would say, yes, it is a very expensive space in order to scale.

Nate (35:45)
Hahaha!

Tom Eddleston (35:56)
I think we benefit from the relative novelty of this category. we, early on, we've been just laser focused on margins and the hemp beverage space, we can command really strong margins, which helps a lot versus say non-alcoholic beer, where there is a very clear price ceiling.

Nate (36:19)
What do gross margins actually look like in a category like this?

Tom Eddleston (36:25)
I would say gross margins can consistently be 70 plus percent and even higher if you are laser focused. And so we would be looking at trying to produce a minimum 70 % gross margin and then also knowing that

Nate (36:36)
Mm-hmm.

Tom Eddleston (36:51)
Compression is on the way that is coming and so when you're an early brand as well. Everything is inefficient Everything is inefficient You yes. Yeah, you get the there's no volume breaks on pricing you're getting the the worst possible pricing on cans on ingredients on your tolling fees from co-packers it is Really everything hurts and so you have to be laser focused on margins and you have to be

Nate (36:53)
Mm-hmm.

Mm-hmm. Yep. I'm into that.

Yeah.

Tom Eddleston (37:21)
also projecting where those margins can get to with scale and with really streamlining operations. that's two things that I think if you've got your margins right, you overcome a lot of issues. And I think from what I've seen, many brands overlook that piece and think that volume will make up for their razor thin margins. And that's frankly a

Tom Eddleston (37:51)
that we don't want to

Uh, so yeah, I would say margins, primary concern then, um, as far as funding goes, no, we, uh, the first few months of this operation were on my personal credit card. And so we didn't want to go out and raise money from friends or family until we had a, um, tangible product. And so as soon as we had a concept, you know, our first pilot run in hand was when we're able to go out with a straight face and say, hey, we have a product, your dollars are going to go into scaling production and not go into ideation, legal fees, et cetera.

Nate (38:32)
Right, right.

Tom Eddleston (38:37)
So we raised 200K from friends and family just via a safe. And that is all we've raised to date. And so coming from the finance background and kind of trying to understand how an investor would look at Fabric or any other CPG offering.

One really important thing for us was to demonstrate capital efficiency and show that we can do a lot with a little. And I think that will...

Tom Eddleston (39:10)
pay huge dividends for us because we're now in a position where we've produced, got a production run actually happening today, another one next week, and it'll be about 60,000 cans, launching an online business, building a team, and building what we think is a really robust brand for 200K.

Nate (39:14)
Mm-hmm.

Yeah, interesting.

Tom Eddleston (39:35)
To scale, obviously we need to go and raise, but we think we'll be in a much better position to win over investors and secure capital quickly because we've taken this approach.

Nate (39:38)
Yeah.

Yeah, nice. Listening to you talk about that, reminds me of something that Joey Cofone mentioned in episode three of this podcast. He said to me, know, Nate, it's a lot easier to build a business in a spreadsheet than it is in real life.

And the point was that, you five or 10 minutes in Excel or Google Sheets, like you can run the numbers on businesses like this and do the unit economic math and actually understand if you're going to get to a point where you've got an interesting business out the other side of it. It blows my mind how many founders skip that step. And, you know, they'll spend two or three years launching a product, designing a product, getting into retailers, opening up new channels, blah, blah, blah, blah, only to realize that the

in economics just don't work and there really is no way to fix them by that point. I'm curious as someone who spent a number of years, you know, in and around numbers looking at finances, you know, fairly businessy sort of mind, what would you say are some of the major differences in terms of how someone like you has approached building a business like this compared to what you see other founders around you doing?

Tom Eddleston (41:07)
Yeah, I think a few things to touch on here. So yes, I spent 10 years living in Excel spreadsheets and I've probably created more financial models for investments than I care to admit. It was the last concern for me was creating a financial model. I think that's...

Tom Eddleston (41:33)
a lot of founders obsess over creating a robust, know, complicated financial model without having any quality inputs. And just like anything, it's garbage in, garbage out. And so they're making a lot of assumptions that are fed by, you know, AI or whatever they can find online about the kind of volume that they're going to produce. And I just think that is

Nate (41:41)
Mm-hmm.

Tom Eddleston (42:02)
It was not something that seemed of any importance to me at all. As I mentioned...
On the other hand, I beat to death our margins. so I look at those every week if there's a change in the products, we're constantly tinkering around the edges and saying, what is our ultimate retail price need to be? Are we going to see more sell through and velocity if we can lower the retailer price? And what kind of incentives can we come up with for the distributor? And those are the things that all have margin implications and if your gross margin is sufficient to support the advertising you need to do, the kind of incentive structures that I'm talking about, then you've got a bit of room to move and you're not constantly in the red. So I guess that's probably the biggest difference is just of course we have a financial model that we're building upon but what we're more trying to do

Tom Eddleston (43:09)
is take the lessons and learnings from rolling out in one market and then ensuring that we have really good data and great assumptions that we can feed into the model to give ourselves a at least somewhat accurate snapshot of what the next market or markets can look like.

Nate (43:15)
Hmm.

I'm expecting that will be music to the ears of any investors who may be listening to this podcast. Just knowing the, you know, the level of detail and attention that you're dedicating to looking at these, these margins and numbers and unit economics. Really impressive. So

Tom, I'd like to ask a couple of more, shall we say, reflection type questions here as we move to wrap things up. In the...

Time that you spend on this brand to date, what would you say is one of the biggest mistakes you've made so far, whether it be about the brand or the product or a channel decision? And how did you unwind it or overcome it? How did you get through this mistake?

Tom Eddleston (44:21)
Oh geez, where to start? Yeah, that's right. I would say the biggest mistake was we'd just gone out and raised capital. had our first friends and family came in. We had about 40K in the bank and we had...

Nate (44:24)
Well, it's only a 45 minute podcast, so.

Tom Eddleston (44:45)
an opportunity to work with who we thought were really leading consultants in helping us formulate a go-to-market strategy. And this was a 15k expense that still I think about all the time and that

It was something that we really got extremely little value from. And it was some consultants who produced chat GPT regurgitated information and tried to talk us through stuff that really was not profound in any way. And

In some ways, I think it was a really good lesson learned early on because to any founders in CPG listening to those who are just getting started.

There are a lot of snake oil salesmen out there and there are people who will try and convince you that only their guidance and advisory services that it's the you know, the keys to the kingdom and it will open doors the otherwise can't open for yourself and They're full of crap There's especially in the kind of AI world that we live in there is very very few things that you can't figure out yourself and reach out to other founders, reach out Nate to people like yourself who are credible experts who are there to assist and provide a real service of value versus, I mean, it's probably boils down to if it's too good to be true, it's too good to be true.

Nate (46:31)
Right, okay. Interesting, and I'm not sure if you got a different answer for this one, but I think the other thing I wanted to ask you is what is something about starting a CPG brand that you wish you knew before you started building one?

Tom Eddleston (46:51)
It's relentless. You have to really be across all of it, all the time. I think that if you are trying to run lean, like unless you have deep pocket investors who are...

Nate (46:56)
Hahaha

Tell me more about that. What do you mean?

Tom Eddleston (47:16)
giving you a lot of runway from day one. If you're trying to build a bootstrapped brand, then it entails

Nate (47:18)
Mm-hmm. Mm-hmm.

Tom Eddleston (47:25)
you needing to know a little bit about a lot and also just kind of as I alluded to the last question was just discerning, you know, who and what is of value and who can help you on your way? Who's trying to sell you the magic pill? And that's yeah, I mean, I was enthralled by a number of these consultants that reached out to me and said that like, we can have you in Rolling Stone magazine next week.

Tom Eddleston (47:56)
and all of these kind of promises that come with, just $5,000 a month plus an equity stake. so I think, yeah, you just have to be constantly trying to determine

Nate (47:56)
Right.

Tom Eddleston (48:16)
what is a value, what do you need help with, what can you afford? And then I would definitely encourage people to adopt that investor mindset of what are the metrics that investors are going to look at and yeah, what is gonna move the needle and help you secure funding going forward?

Nate (48:19)
Mm. Yeah.

Hmm.

Interesting, Yeah, it's certainly a grind, but I am impressed by the approach you're taking to all this. It's certainly a fascinating time to be in this space with things moving so rapidly on the regulatory side, on the consumer demand side. You know, it's, yeah, it must be a fascinating ride that you're on and I will continue to watch it with great interest.

Tom, before we wrap things up here, where should people go if they are interested to learn a little bit more about you or the business? You mentioned the D2C launch coming up. It be a good time to plug that. Where would you like me to send people? I'm going to include all these links in the show notes below, by the way.

Tom Eddleston (49:23)
Great. We are, our website, drinkfabric.com. We, yes, have an upcoming DTC launch and it'll be a charity drive in October. So please check it out and support us and support mental health. Instagram, drinkfabric, and you can find the myself and the fabric team on LinkedIn.

Nate (49:38)
Perfect, cool. Well, thanks again, Tom. Happy Friday and being great having you on the pod. Thanks for joining me. Take care, bye..

Tom Eddleston (49:55)
Cheers, mate, really enjoyed it.