Episode 87: Supplier CMO Series, Adam Kovar with ETS Express

Welcome to Skucast, the podcast for entrepreneurs in the promotional products industry. Skucast shines a light on our industry's best work, features maverick personalities, and discusses what's really involved in running a modern promotional products business. Skucast is the official podcast of CommonSkew. Hello and welcome to SkewCast.

This is Mark Graham, and we are back with another edition of our Supplier CMO series. In this series, we interview prominent marketing professionals on the supplier side to uncover what it takes to market effectively within our industry. Supplier marketing professionals often play a less visible role compared to their sales colleagues. This is not entirely surprising given that sales is very much on the front lines of our business. This series is designed to uncover the personalities of our supplier marketers and to better understand the role that marketing plays in bringing promotional products to market. I'm excited to share with you my conversation with Adam Kovar, VP of Marketing at ETS Express. ETS has been on the top of most people's lists as one of the most innovative and admired brands in the industry, and I wanted to get inside Adam's head to understand the magic behind it all. Adam is an unconventional marketer, not trained in the academic sense, but rather he cut his teeth in the operations and sales side before moving into the marketing role at the company. ETS is a unique, much admired, and sometimes copied brand in the promotional product space, and we get into it all in this wide-ranging discussion. I hope you enjoy.

Hey Adam, it's such a great pleasure to have you on the Skucast today. Welcome, sir.

Thank you so much, Mark. Happy to be here.

Let's get started off with your background. Can you give us a quick background as to what led you to ETS?

Sure. Very short story. Used to kind of be an entrepreneur, tried to get something off the ground. I was working a ton of jobs. I was working as a barista, waiter at a couple places. Ended up meeting Mark Sofa, former executive VP at Sweda. This was maybe almost 20 years ago. Said, why are you working all these jobs? I told him I need flexibility and some cash to get a product off the ground. So why don't you work one job? I ended up working at Sweda in sales for about 5 years. They moved me up to Northern California. I was a rep in the Bay Area. I ended up moving back to LA, decided to resign and try getting that same product I tried years prior off the ground. After about 2 years and losing a lot of money, I needed to get a quote-unquote corporate job, and I was introduced to ETS, and that was about 12 and a half years ago. Started off as a sales rep in Los Angeles, Southern California area, and Arizona. And after about a year and a half or so, the company ETS was growing so much, they just needed more internal kind of leadership. And so I took an office job for the first time in my life. 10 years after that, I'm still here in the office. So that's a short story.

Yeah, that's, that's amazing. Can you paint a picture as to what ETS looked like 12 years ago in terms of size and complexity? I mean, we all know that ETS is a big company today, but 12 years ago, what did you look like?

About 12 years ago, we had about 50 employees plus or minus. Obviously, we're only on the West Coast in Oxnard. We were grossing somewhere in the neighborhood of $7 million and much smaller from a staffing perspective, from a volume perspective, but very busy at that time as well compared to how we are today, which is I think this year we're going to finish over $100 million. We have about 550 employees between our California operation and North Carolina. So, a lot different, a lot different. At that time, we were in a 40,000-square-foot building when I started. Now, over here, we have over 200,000 square feet in Oxnard and 150,000+ square feet in North Carolina. Wow.

It's like you had to just buckle up 12 years ago and you just buckled up and look at where you are now. That's awesome.

Yeah.

So, let's get into your job as VP marketing. What's the job description?

What do you do on a day-to-day basis if you can try to encapsulate what that is like for our My job as VP of marketing is actually a little bit convoluted in that I'm also heavily involved in compliance and sourcing, which is something I don't know if you're aware of, but I also run all the compliance. So it's kind of, maybe it doesn't seem fitting to be in charge of marketing and compliance, but I happen to know the product very well and I've been to the factories multiple times. So I get involved on that end. So my standard day as VP of marketing is actually multi, wearing multiple hats. Actually, all the leadership of the company wears many different hats. But from the marketing perspective, just kind of get back to that, I deal with our graphic designers, photographers, and we talk throughout the day. We're moving at a very fast pace. There's product always coming in, product that needs to get shot. And so I'm involved with that kind of all over the board, Mark. And I know I'm not giving you a perfect answer, but my day varies. I mean, it's all over the board from helping with concepts on how do we want to show this item, what's the story behind this item, what are the benefits and features of this item, not to use the cliché terms, but how do we want to tell that story of these items or these category items? How are we going to decorate it in such a way to excite our outside team and our inside team, particularly our outside team as they're knocking on doors every day? I mean, we got to keep these, you know, you got to keep the salespeople excited and motivated, keep showing new stuff. Not that they're not motivated, but if you can show them new and give them new kind of bits of ammunition, and that's our job. I mean, our job from what I see is to continue to develop the toolbox for the sales team.

I mean, I think it's the perfect answer, right? You're, you're, you're running a million miles a minute. You're this fast-growing company. You've got these highly adaptable entrepreneurial people at the executive level that are making decisions across all the different categories. So I think it's actually a really interesting answer. And it brings me back to this conversation you and I had offline a few weeks ago where you'd mentioned that— I think to quote you, you had said the only reason you've lasted at ETS is because of the latitude and freedom that Sharon— and for those people who don't know Sharon, Sharon is the CEO and one of the co-founders of ETS— but just the freedom and latitude that he's given you in your job. Can you talk a little bit about what that's meant for you in terms of your job description and your relationship with one of the founders?

100%. If Sharon was any different, I would have never survived here. I had my own— I'm an entrepreneur at heart. And, even though I haven't been successful financially that way on my own, since high school, I've always had ideas and things I want to create, what I formally like to call idea diarrhea. Coming into the office here, I was nervous because you start to feel kind of trapped if you're that entrepreneur kind of free kind of thinking person. But, Fortunately, not only have I been able to travel and get out there and see clients, so I'm not always in the office, but Jerome, our leader, our captain, has given me tremendous latitude, and not just me, but all the leadership of this company. So, I'm able to heavily— not actually, I take that back, it's not really heavily, just I'm given the freedom to be able to create. So, everything that I learned from being on the sales side and knowing the market space, knowing what it's like to be an outside rep, knowing the challenges, dealing with the customers and hearing what the pros and cons are. He allows me to be able to create with my team tools for the sales team to sell. And often we don't see eye to eye. And he's like a brother, a dear friend of mine, and a great mentor. But we don't see eye to eye and we get into heated debates. And often in the past, he'll still say, go ahead. Even now, let's just do it. Go do it if you feel like that's the right thing to do. And sometimes I'll fall on my face. But he gives me and others here the freedom to do that. And so if he weren't giving me that sort of freedom to be an entrepreneur under his umbrella, I would have never survived here at this company, which leads me to believe I probably wouldn't survive at many companies.

You and me both. You and me both. That leads to an interesting question that I often like to pose to different marketers is what seat does marketing have at the table at ETS? I mean, you mentioned how you get into these arguments, productive arguments with Sharon about marketing decisions that you and he may disagree on. Do you ultimately get your way because ETS is ultimately a marketing-first company, or am I reading too far into this?

Yeah, I think you might be reading a little far, Mark, because I don't always get my way. As we've grown, obviously there's other things to think about. Even though we're a keep-it-simple type of company, despite our growth and everything, we try and just keep things simple. There are other things to look at. Like now we analyze numbers more and try and be a little more analytical in our approach. And sometimes we may have discussions back and forth on that. So not just Sharon, but Brandon, me, and others, we may not see eye to eye and we all have a different perspective on how we're coming at it. And that actually is sometimes a challenge for me because I'm pretty stubborn and opinionated. And I'm trying to still get used to sometimes looking at things from a different lens. Even though my gut says move forward this way. So no, to answer your question, marketing has a— marketing team, myself, has a heavy role at the table in the leadership and direction of this company. But no, we certainly don't always get our way. And it's best that way because we don't know everything.

We think we do, but we don't. Yeah. I mean, ultimately, there's an interesting sidebar discussion here around conflict at companies around the executive table. Catherine, who is my co-founder and also my partner in life as well, I often talk about our experiences here at Commonsku as our executive team has grown and that when you bring on experienced tenured people in business that have all come from a wide range of backgrounds, healthy discourse and debate and disagreement is I think the sign of a healthy company because if you've got everyone that's agreeing with one another or they're too scared to take on the co-founders, then you just have a bunch of sheep that are following you potentially off the cliff. We often remark as to how good it is to have those healthy conversations, the healthy disagreements. And then ultimately, we all have to be on the same page as we make the decisions, but it's been very, very rewarding. So it sounds like you've certainly got that same environment at ETS.

Yeah, and I agree 100%. I mean, it's because of that you kind of go into it and you sit around the table and you have that heated debates and healthy debates, different perspectives. And that's something that's been a challenge for me and something I've had to learn because I am pretty stubborn by nature. I think I know, but I don't. Sometimes it's hard to let go of ideas, to be honest. But, you know, there are other professionals I work with here and we try hard to keep our eye on the big picture, which is the company itself.

Absolutely. I think if you've got that in mind, then that's the most important thing is as soon as people go off into a me, me, me type situation where it's all about making themselves look good, then that's clearly when things don't work out. I want to shift the conversation towards the ETS brand for a moment or so. How would you define or describe the 3 non-negotiable truths about the ETS brand?

In my 12 years, almost 13 years here, I know we want to do what's right and ethical. We want to keep things simple, not overthink things, and just bottom line, take care of the customer and do what we say we're going to do best as we can. And we all know that in production environments, it doesn't always work out. That way, but at least be honest and clear from the beginning and transparent. So basically keep it simple, which is, I know, kind of cliché, and do what we say we're going to do. Be true and honest with our customer. And another thing is to do what we think is right for our company, not what necessarily the industry or our competitors are doing. And I think that you've probably seen that in the industry as that Sharon has led our company in a direction that's not always in lockstep with all our competitors.

I think all those three truths, as someone who has been a customer of yours and also just someone who has known the ETS brand for some time, I would agree with those three. I think anyone who is familiar with ETS would also agree. I think the last one, I'm glad that you said that because I think that you see that sometimes companies can get almost too involved in the industry in terms of the industry groupthink. That is good, I think, to some extent, but if that's the only way you think, then it's hard to innovate. Is there an example or two that you'd be able to share that would illustrate how it is that ETS has gone against the grain of the industry, ultimately for your benefit?

Oh yeah. I mean, I think probably the biggest and most recent one over the last year was the discussion of rebates, which I know has been a huge subject. And, you know, we have all suppliers are, have demands put on them by some of the larger distributors in the industry. We decided to basically say no. Despite the pressure to much of it, because it just didn't work out for us on our bottom line, just wasn't healthy. And we know how much we're investing in the company. Compliance, like I mentioned earlier, is a huge one. That's hundreds of thousands of dollars in time spent. I mean, actually it's probably closer to $1 million a year, third-party testing and everything. So we said no, Sharon said no, and that created quite a stir, but it worked out well for us. And maybe that's kind of a bold move, but it was the right move for us and it it hasn't hindered our growth that I'm aware of. We keep an upward trajectory and then we are healthy for future business from the distributor base out there.

Right, and at the end of the day, if you're a profitable company and you've got a solid bottom line, then at the end of the day, you're gonna be able to innovate and continue to grow at a healthy rate. I actually think that's very interesting. I was aware that you had made that decision and I remember initially thinking like, wow, you're gonna face all sorts of blowback from the national accounts and the buying groups who at the end of the day, that is one of the biggest pieces of value that they offer to their distributor customers is the ability to share a rebate. And in some cases, it's one of the key reasons why some of the larger distributors actually remain in business is that rebate check they get at the end of the year.

So that's true. And that, you know, I know that was a pretty heavy conversation internally here, but certainly it was the right way to go. I mean, we just can't afford to do that. You open that door and who's to say a year or two later it's not changing and it's this nonstop evolution of more and more from the supplier, even though we're one of those suppliers I know, and there's many out there that keep investing on the backend to, like you said, innovate and ensure that we have a good offering to distribute out there. And we can't do that if we just keep giving everything away. I mean, there's other examples. You know, we were in a lawsuit with Swell not that long ago, and that was another example. You know, I think many in our industry would probably have backed down Jerome decided to, because it was the right thing to do, can't just take an open source item and say it's yours. And he chose and we chose to stand up for the industry and knock on wood, we won. But if we had lost, and that was a huge risk right there, if we had lost, that would open the door for retailers and brands and everybody to just start kind of coming at our industry. So that was another one that I don't know that many in our industry would've done what Jerome decided to do or what ETS decided to do.

Yeah, that was amazing. That whole, I must admit when I read that press release release, I think it came out in PPB or an ASI Counselorgram, there was a part of me that I shook my fist and I was like, yes, good, good on you guys. Right. It's like the little, the little guy and you're not so little, but you're little compared to Swell. Right. And their brand and their intimidating, you know, group of lawyers and deep pockets. You were the little guy.

You took them on. Mark, I could tell you there were several of us in the courtroom in the Second District in Manhattan for almost 2 weeks, including me. And I was there, Derek, our VP of Operations, Sharon, Tally, and it was incredibly emotional. And when we came through, believe me, there was more than, uh, just kind of a fist. I mean, there were some tears of joy. I mean, it was, it was a big day for us in the industry.

Absolutely. How cool is that? Going back to that, that rebate discussion, one of the questions I had for you is, do you think the reason ETS can— I'm going to say it this way— get away with being bold and making some pretty bold decisions to stand up against some of these big distributors who rely on these rebates for their business and ultimately could cut you off. Do you think the reason you're able to get away with this more than, say, a more average commoditized supplier is that all of your designs are unique? You invest in all of these products yourself. You can't be knocked off. You're not going— or knocked off as easily. You're not going to the on fare in China every year and placing an order with a factory stock product, bringing it back to the US, inventorying it, and selling it for less than the other guy. I mean, at the end of the day, an ETS product is an ETS product. And because of the fact you've so heavily invested in that design, I suspect that the distributors who you told no to the rebates would say, well, we don't have much of a choice to get an ETS product anywhere else. So as a result, you had the upper hand.

Is that fair to say? To a degree, yes, but it's actually quite a bit more than that. Of course, you know, we do have some of the items that everybody has— a C-handle, a pint glass, classic aluminum bottle that everybody has. So we have some of that. So it's actually more complicated. We do have product design in-house. We do have many products that we own IP to. But really, it gets back to not just product innovation, but our decoration capabilities and the investment that's been put into our production line. For over 3 decades. And that, in my estimation, you have to be able to decorate correctly. And according to some end buyers' brand guidelines, you have to have the PMS color right. You have to know how to put yellow on a blue. I mean, you have to know how to print and decorate correctly and large and with precision and registration. And that we've been doing, I'd say we're pretty at the top of our game on cylindrical surfaces. Drinkware for a long time. So I think that trumps the product, to be honest, because if we had great product but we couldn't decorate with these larger end users or even the smaller ones that are very keen to their identity, in the end you're going to create crap, you know, for lack of a better word. So you might have a great item and you might be the only one with it, but if you can't decorate it or you can't print someone's brand correctly, you're in trouble in the end. So I think the decoration and the production trumps the the product design, although don't get me wrong, the product design is huge. Every time you go into a sales meeting, everyone wants to know what's new. You have new and innovative stuff and you have— that's— and okay, I'm going to just keep going here for a second. The other is, is you have to have inventory as a company. We invest millions of dollars in inventory. You know, I just— 2 miles from where I'm sitting right now, we have over 100,000 square feet full of inventory in North Carolina. We have of the 150,000 square foot building, we have half of that is full of inventory. So we didn't split our inventory when we, when we, when we opened a production facility over there, we doubled our inventory. And so, you know, our clients, not only they used to great decoration and screen printing, and we've stayed pretty focused on that for now, but they're also comfortable knowing that we have pretty deep stock on our popular items. So Mark, you're totally wrong. I'm just kidding. But I think the product design is very important and that's where we start. But if we didn't have that other stuff on the infrastructure side, we're dead in the water.

And it's not the first time I've been wrong, but I think that what you've done is you've painted maybe a broader picture as to why ETS continues to win. I mean, this will be the last question about the rebate discussion, but I think that you may have some suppliers suppliers and distributors that are listening to this podcast that will be interested to know how it was that you were able to stand up to a big national distributor that's asking for X amount of rebate and potentially you're— you stand to lose sales immediately if you're not going to play ball there. You mentioned that your sales have grown, so how do you feel you were able to skirt that? Because I think there's a bunch of suppliers that are are trying to figure out how it is that they can do the same because there's a sentiment in the industry. I think Michelle Bell wrote a really great article on this about a year ago in terms of the supplier squeeze. It was an article in Counselor Magazine, which validates, I think, this concern that a lot of suppliers have about these rebates that are crippling these days. And you're potentially an inspiration for these suppliers that may look for a way around that. If you were to try to crystallize as to how it is you were able to stand up to that and still grow sales, how would you describe your approach?

Well, I think that does get back to something that you had mentioned in the last question, which is yes, you know, if we were a $5 million company and we were asked about rebates, we would probably see things very different. But our bandwidth is much larger than it was 10 years ago and 12 years ago. So yeah, there is some of that. Like, look, we're selling, our customer base is much larger. There are other larger distributors that will continue to buy from us that haven't tried to force our hand with baits.

But— Right, you have leverage.

Yep. Yeah. So yeah, I mean, clearly the fact that we're way more established than we were 12 years ago had a hand in our ability to be able to put our leg, you know, like dig in and stay there. But at the end of the day, if we had said yes, we are not gonna be around for most of the other customers who just want to get good product in a timely fashion from us. So I think for a smaller company, it's harder to do that. Same thing with fighting a lawsuit. We're very fortunate that we have a great team, that the drinkware and hydration market has exploded, and that we've continued to invest in most of the right categories to ensure that our infrastructure is strong. We're a smaller company. Yeah, that'd be— it'd be hard to say no because you want to get in. And I think, you know, years ago we were more likely to say, sure, sure, sure, sure, sure. Because we get our foot in, but our foot is everywhere. And so I'm not trying to come off cocky. It's just we do sell a lot of drinkware and we do kind of hope that the salespeople on these large— with these larger distributorships continue to want to sell our product because they know that they aren't many places to get better, you know.

Well, I think the key to what you're saying there is you have a distributed customer base now and you're not reliant on any one particular channel. And the reason I'm so fascinated by this question is that there's also a direct parallel on the distributor side of the market. So putting my distributor experience with Right Sleeve on, when I first started the company would've been similar to when you guys were smaller. I was desperate to get into the quote unquote big accounts and they would have these requirements on the end client side with rebates and all free samples and, you know, free ideas and blah, blah, blah, all these restrictive conditions that were much more in favor of the buyer. But as someone who was young and inexperienced and aggressive at trying to grow the business, it seemed like the easy way to get in. As Right Sleeve grew, those conditions turned out to be quite punitive and limited our growth. And if, if anything, actually put us more reliant on a small group of end customers who had these bad deals in place, or at least bad deals for us. So as the comp— as Right Sleeve then grew and we became more confident in our value proposition and all the different things we were bringing to the market, we could stand up to a procurement department and say, we won't do half the things you're asking for, but if you wanna work with us and with our track record and the value that we bring to the market and the expertise we bring to this particular industry, whatever, then here, here's the deal. And I remember at first being terrified having those conversations, thinking that I was gonna get my butt kicked. And it's amazing how many of them come back and say, you know what, we actually do want to work with your company because of X, Y, and Z. And we would put together a different deal. That to me was amazing because not only did our revenue grow, our bottom line grew and, and has now never been as big or as more profitable because of that confidence that we brought to the market. So I, I share that story for the distributors that are listening, that it's not only just and ETS that can kind of stand up, but distributors can also do that too, because no question procurement departments in the Fortune 500 companies are just as demanding as the big distributors are of suppliers. So that, that's my little public service announcement there.

Yeah, that's a great announcement. I mean, you have to know your value and confidence. You got to take the right steps to make sure you're going to survive and not waste a lot of time dealing with going down a channel or a road that just going to be fraught with like a non-for-profit kind of situation. I mean, we're in, we're in this to make money as well and survive.

Yeah, exactly.

Um, okay.

I want to shift gears and talk a little bit about product design to the extent you can speak about this. Can you take me through the product development process and how you introduce a product from an idea in Adam or Sharon's head to something that hits the market?

First off, we do, we do have a product development team here in-house, a couple of people here in Oxnard. Uh, we do a lot of design here. We have 3D printers. So that kind of speaks to the fact that even though we do attend the Canton Fair occasionally, we mostly do visit our factories and we do see other items that are already ready to go and then we might put our tilt on it. We do a lot of our own design here. But really it starts with, for example, we go to the Chicago Housewares Show and we go to the outdoor, the outdoor show in Utah. And so we jump outside of our industry just as I'm sure other suppliers do. And, and distributors, uh, to kind of see what's trending in the retail space. Because after all, our industry does sort of get a little bit of its ebb and flow from what's trending in retail. I think that's a fair statement to say generally. And so we want to keep our eye on that. Sharon does that, uh, Blake, our product development manager, does. I do. And as well as others, believe it or not, Sharon's sister, who's a partner in the company. CFO Tally does that. Brandon, our VP of sales, does that. Derek, our VP of operations, does that. Our customer service team does. So, a bunch of ideas will flood in from different parts of our company, different departments, to the product development team, to me, to Sharon, to Blake, and others. And we'll see if it's something that we're lacking on. You know, like, hey, we have glass bottles with silicone sleeves are very popular in the glass category, but what are we missing? We're missing this kind of lid, or, and then we'll start designing maybe a more Sport Lid. I think I'm not really answering your question, but it kind of comes from everywhere. And then we make sure we go to other shows outside our industry to just kind of see what's hot and new. And then once we get some ideas, like for example, right now the vacuum stainless steel bottle category is exploding. Everyone and their mother is getting into it. And even people, companies that don't traditionally sell drinkware are now selling a vacuum bottle. So we're trying to figure out, well, what can we do different there that others aren't doing. And that's challenging because how do you think everything's been created as it relates to a water bottle or a tumbler? But that's certainly not the case. You just got to jump outside the box and start thinking differently about stuff.

I'm going to follow it up with a maybe a more specific question because my question maybe assumed that everything you were doing at ETS was your own product design. So why don't we now shift it towards, like, let's take a product that is specifically yours.

Okay.

So it's, it's something that you're, you're developing from scratch and you're manufacturing it and you're bringing it in and then decorating it. I'm curious about that development process with, with something that is produced, designed, and ultimately outsourced for manufacturing, but all that is done in-house. Talk me through that process.

We come up with an idea, literally starts on a napkin, literally some of the time, goes into 3D in our product development team. We print it on a 3D printer several different times if we don't hit it the first time, see if we like it. And we start rendering things out in different colors on screen. If it's a go and we're excited about it, then of course we need to kind of in parallel with that, we need to do all of our intellectual property research with our patent attorneys to make sure that we're not infringing upon anything. Because as you know, and given our past of what happened recently. We have many design patents, several utility patents on drinkware. So we're very familiar with IP and have been prior to the whole lawsuit of last year, this year. But now and then intellectual property side of it is very important. I mean, you got to make sure you do your homework before you invest any more dollars beyond the idea, because who knows, you may need to modify something or, or it may already be out there. But assuming it's not, then from there, then we go to tooling. Most of our items are made in China outside of glass. Make the first shots, so to speak, and get them, make sure we like them, pick the color palette, and we run with it. Then once we, we know that everything's in mass production, we let our sales team inside and outside know these are the items coming. They start hitting their key accounts that need to know about it and let them know what's 3 or 4 months out. And then when it's on the water, we, we've already aired in samples to our sales team so they can kind of pre-sell, so to speak. And of course, In combination with that, we put a killer decoration on it to help further tell that story. And when we get stock, boom, we get moving, send out an e-blast, which is the best ROI we have from a marketing perspective. And the team in the field has them to show out of sight, out of mind, you know. So very basic, Mark.

No, you've nailed it. And I would actually disagree. This is where you're wrong, Adam. That's not basic. That's actually Pretty interesting. You think about everything that's involved from that napkin idea all the way through to the, to the final marketing push and sales push with that e-blast you're talking about. Think about when you were that $5 million supplier, you wouldn't have had the funds to go in and do that to the same extent. You're talking, you've got the cocktail napkin, but then you're speaking to your IP lawyers to make sure that you're not wasting your time or that that you're infringing on someone else's design or patent. And so you've got cost even before you've gone into tooling. And contrast that with how— I'm not going to say all suppliers, but let's say some suppliers that you see at the expo or at some of the ASI shows, where you walk around and go, well, I've seen that bottle in 17 other booths, and it's clear that they're going over to China and they're just picking some generic product from a generic factory and bringing it in over here and then just hoping that they can tap into some drinkware sales or some baseball cap sales. What you're doing is a lot more capital intensive, and I think ultimately has paid off for you. But talk about the barriers to entry, product design and development standpoint. I think that's quite fascinating.

Yeah, that's true, and there is expense of that. But, you know, honestly, when I came on board 12 years ago, Sharon and his father Eli, uh, Eli who founded the company— there, there's why you have ETS, Eli Talley Sharon— they going to China for many years already directly. There was not a middleman visiting with the factories, touring the factories, developed strong relationships with the factories. Even when we were smaller, we already had a great reputation with factories making drinkware in China. So they're very flexible with us. When we're asking for something, even then they would bend over backwards to try and make it happen for us.. And that helps too, because they also know what's going to generally come from that are large orders.

I want to pivot to talk a little bit about Prop 65, not only because you're a California-based company, but because it's something that everyone in the industry is talking about right now. And given your product design story that you just told me, as well as the fact that you're big into compliance, can you talk to me about how Prop 65 has impacted ETS? And because this is a marketing podcast, a little bit about how that has been seen as a marketing opportunity, if we can frame it that way.

Sure. Very simple. Years ago, we used to use the old glass and ceramic inks, and I think it was maybe, you know, which those would have required the labeling, the prop, you know, the warning label. I think maybe 8 years or more ago, we decided to go to using inks that do not require, that have insignificant levels of lead, cadmium, et cetera. And so we would not be required to put a label on because we stayed below that threshold. And, from a marketing perspective, that's very important because many of our clients were selling to hospitals, for example. And so, all of a sudden, ceramics or some kind of drinkware shows up in a hospital and it's got this "this may cause cancer" warning label on the bottom of it, of course, people are going to get freaked out over that. So, we kind of were forced and wanted to make— not forced, but we wanted to make sure that we didn't scare the end buyer. And so that forced our hand to change the ingredients on the inks, find inks that are compliant to the point that we know we don't need a label, and also the products themselves to make sure that, uh, you know, they're phthalate-free, etc. So from a CalProp 65 perspective, for many years, just to kind of sum it up, because that's kind of all over the map right there for a second, all— we, we have not used labels. We don't need to use labels. So really hasn't changed our workflow that much, but we make sure when we're doing third-party testing, well, we're always doing the testing that's in accordance with CalProp 65 with the third-party labs. So, for example, phthalates, cadmium, et cetera, and making sure it's BPA-free, all the above. But, just to answer your question more poignantly from a marketing sales perspective, when our team walks into a distributor's office, they can comfortably say and we can market We have no labels. We test everything for heavy metals, and our inks are compliant. So it makes it very easy to sell because it's not like, all right, these 20 items have a label, these over here have a label, it may have a label. There's no labels. So from a market— from the psychology end of it, those buying from ETS, very easy. We don't need labels, and we test everything, and we're happy to show you the test.

I mean, talk about an incredible marketing pitch. No labels. You simply simplify it. I can tell you I was part of a distributor conference just a couple weeks ago, and one of the chief concerns was how to manage Prop 65 within a company store program. So you have company store program, you've got a Fortune 500 client that's got buyers that are all across the US and Canada or even the world. And if you have a supplier like Supplier X that maybe 95% of their line is Prop 65 compliant, but 5% is not, and, and that supplier is being on the up and up by making sure that's clearly labeled. Now the distributor has to have two inventory SKUs where there's labels that, that go on product that is being shipped to a California end client and, and no labels being shipped to people outside of California. And distributors are racking their brains as to how it is that they can manage this from a backend perspective. And that's just That's just one example of just the complexity. So, if you can walk in and say, "Hey, we don't have to worry about any of that stuff. We've been on the up and up not only in the last year or so but have been for the last 8 years," then it just makes things much easier.

So, that's great. [Speaker:BEN] I mean, that is a huge headache and it doesn't seem to be getting any easier for that space and it's incredibly complicated. I mean, the list is hundreds and hundreds long. And how do you know when it's a new item, is not a new chemical or a new part of it's not going to be in the news. And then all of a sudden adjust and that's scary and that's hard to keep up with.

Oh, it's, it is scary. A few more questions for you because I know you've been very gracious with your time and we could go on literally all day here, but I'll try to round it out with just a couple more and then get you on your way. So ETS is one of the very few category killers in the industry today. Do you have do you have plans to expand into other product categories outside of drinkware, or is it drinkware forever?

Well, forever is a hard word, but I—

Okay, drinkware for the foreseeable future.

We could diversify within drinkware, put it that way, from a decoration perspective, from a category perspective within drinkware. Not that we're going to get into this, but for example, stadium cups. I mean, we don't sell stadium cups, but we could, and that's drinkware. I don't think there's a need to diversify outside our category, our drinkware hydration space, there's perhaps a need to diversify within decoration capabilities and maybe some other drinkware categories. So yes, I see us diversifying a little, but that's not outside of our basic space.

As PPI or ASI puts that graph together, you got wearables, soft goods, hard goods, drinkware. Well, and to jump back to the earlier part of the conversation, where we, we were citing examples of where ETS has gone against the grain, against the traditional industry way of thinking. Most suppliers that reach $100 million in sales, and to be clear, that's a pretty large supplier number, would be looking at additional ways that they could grow. And one of the easiest ways to do that is to become a multi-category type supplier. And there's nothing wrong with that. I mean, there's lots of advantages in working with a supplier like Leeds, for instance, that has— that does really well in drinkware, but they're also great in bags and now wearables. And you can go there and you can be effectively a one-stop shop. So I can definitely see the, the value in going that route as well. But very few people have reached your size and have remained committed to that single category, at least for the foreseeable future.

Yeah, well, that again speaks to the popularity of drinkware, not retail in our space, drinkware, and then the global campaigns of not throwing away plastic water bottles. So, all these different kinds of corporate initiatives, drinkware has a decent branding space on it unless it's a shot glass. But, I know I used to work at Sweda many years ago and there was something great about from a sales perspective being able to sell multiple categories. Okay, I get a pen, a memo book, a calculator, a wall clock, and we can build this whole program out of it. For us, that's a little challenging, but fortunately, knock on wood, drinkware has been a great and flourishing category that I don't see changing at all.

Yeah, no, I think that's a good point, making sure that you're in a category that is growing and is dominant as opposed to something that's more nichey. So what are 3 brands that you admire the most and why? And these are brands outside the industry.

Oh boy, Mark, I have no idea.

I could just— Not to put you on the spot.

I don't follow, uh, and this is going to really sound stupid, but I don't usually follow in our industry a lot of what's going on in terms of sometimes things are brought to my attention, uh, and even outside. But that's not to say that I don't pay attention to the psychology of things. One, I want to answer a question. Nothing really comes to mind, and that might startle you and whoever's listening, but there is so much low-hanging fruit in our industry. We're in a pretty creative and simple industry to a degree. We're busy enough just looking around of what, what can we offer our sales team and our customers with what we have. So, you know, like, how can we make it easy on the mind to understand this item and go sell it and to their client? So I walk into— again, this is not answering a question, but it's an answer. So I went into IKEA recently, and I love going into IKEA, not so much because I see our drinkware similar to IKEA, or how can we make our drinkware similar IKEA? But the psychology of how they move people through there, how they tell their story, you know, if you have a budget of $500, this is what you can get for a room of 200 square feet or whatever it is. And the psychology behind that is absolutely fascinating to me. So when I walk into an IKEA from an operational marketing psychological perspective, that's fascinating to me. Or same thing even at an Apple Store. I mean, it's just amazing when you walk into Apple Store or an espresso shop and how can we convey, how can we get to that level for our client's client to make the job easier for the distributor to say, check this out, and then they want to buy it, you know?

And so that's not answering your question at all, but well, and here's, here's where I'll also say you're wrong is that you have answered the question because you gave me IKEA. You gave me Apple. Now you just need to give me one more. You're on a roll here, my friend.

Yeah, but I don't, don't mistake that. We don't look to IKEA like that's how we want to be. That's not why I brought it up. It's more the psychology because marketing is all psychology, sales, psychology. Like how do you make it easier to tell that story? And it's hard because we got to tell that story through you, like at Right Sleeve to your end buyer. And along the way, make it easy for you to tell that story. So, make business happen.

So yeah. Hey Adam, that was a phenomenal conversation. Really appreciate all of your honesty, all of the great answers. I loved how you and I went back and forth and disagreeing with one another on some occasion. Thank you so much for everything that you shared with us on the SkewCast here, and I hope you have an awesome day.

Thank you so much, Mark, for having us. Hopefully we gave some kind of decent answer to something, and I hope you have a great day as well.

You certainly did, and, uh, and, and keep up the good fight. You guys are certainly doing something very interesting there, and I love how you're zigging while others are zagging.

Yeah, thank you very much, Mark.

Thanks so much for tuning in to this episode of SkewCast. Be sure to keep up with our latest content by subscribing to SkewCast on iTunes or to our blog at community.comandskew.com. Com. Until next time, friends, thanks so much for listening.