Jordan Buckner (00:00)
Tariff are top of mind for every CPG founder that I talk to right now, especially as supply chains are based globally, typically, even if products are manufactured in the US. And it's really important to understand how it's going to affect your business both now and into the future as it relates to your supply chain, but also the products that you're selling, sales, and promotions that you are running. So.

To dive into this topic a little bit deeper, I've invited on my friend and frequent podcast guest Yuval, who is the co-founder and CEO of Promomash Yuval, welcome on again.

Yuval Selik (00:35)
Always a pleasure, my friend, always a pleasure.

Jordan Buckner (00:37)
So we're gonna have some fun even though we're talking about tariffs and things in the economy. I always enjoy our conversation. So I love to start off by getting your sense of the types of tariffs that are currently impacting CPG brands the most and just your general sense of is this helping, is it hurting? What kind of world is it creating as things change over the next few months to years?

Yuval Selik (01:01)
Yep, well, let's take it one step at a time,

So the tariffs impacting CPG brands most right now, I think, focus heavily on packaging materials, right? Things like aluminum, glass, specialty packaging, I think especially imported from our friend China. know, brands relying on premium packaging feel the pinch most significantly, I think. I know that I was with my brand Luvala, the packaging was huge.

Right, so what's interesting though, it's not just the tariff itself, but what it reveals about a brand's operations, I think, if we're gonna go a little bit deeper into it, right? Many companies, they realize that they've overlooked inefficiencies in their sourcing, inventory control, cost management for years. And it's almost like a wake-up call, I think. I've had clients uncover...

hidden costs because the tariff pressure forced them to actually take a closer look at their supply chains. And I think there is a silver lining out there. the silver lining here is that brands are now motivated to address these long-standing issues, potentially, I think, this challenge into potentially an opportunity. And dare we say, run leaner and smarter?

Jordan Buckner (02:12)
You know, it's interesting because as you're just kind of mentioned made me think when I was running my brand I remember we looked at our supply chain our pricing You know when we needed to and sometimes that was once a year Maybe once every other year for certain ingredients and then don't really realize how costs have just changed overall like for that supplier or

how there might be a better or less expensive option available, how you might have more negotiating power. And I think there are a lot of those inefficiencies that brands are able to recover when they really dive deep into their supply chain costs.

Yuval Selik (02:47)
It's not just brands. I mean every company. It could be Promomash could be a law firm. I you're going to encounter whether it's a tariff or a disruption of the outside world. It's going to come. I guarantee that's the whole point of being an entrepreneur. You got to figure it out. But if you don't come prepared to the party, mean you're screwed right there.

Jordan Buckner (03:04)
I think knowing your costs are definitely key. I'm curious from your perspective, how should brands think about their pricing and margin structure because of it in terms of, I guess one is probably figuring out what your cost increases actually are going to be or potentially could be. But then is this something that can be passed on to consumers? But when you're doing that, you have to raise your price to distributors, to the retailer. Like there's multiple layers within there before it even gets to that customer.

Yuval Selik (03:29)
That's a great question. think when tariffs increase costs, the immediate thought, the

addressing the symptom is just let's raise pricing, right? And sometimes I got to be honest, brands have no choice. There's just absolutely no choice. But it's often smarter to pause, I think, and consider other options first, or at least review other options, right? The best companies look deeper. They might reformulate products slightly if they can, simplify their product lineup potentially, or maybe

change it up a little bit, right? Negotiate better deals with suppliers. God forbid, talk about negotiations these days, right? Retailer relationships also play a big role, right? If you build strong relationships, you can then openly discuss certain ways to share or mitigate these costs rather than simply just pushing higher pricing down the line. But unfortunately, Jordan, brands that jump straight to price hikes.

without clear reasoning can really hurt their relationships and risk losing valuable shelf space, market presence, and just pissing off customers. I mean, that's really what it is. I'm a customer and I'm used to buying your brand at a dollar and all of a sudden it's $3, you know, that's a problem for me. I might look at other options. there are a lot of issues that come with raising pricing and I don't think price hikes should be the first thing to...

to be looked at from a brain's perspective.

Jordan Buckner (04:46)
Yeah, I mean, it's interesting. I remember seeing a letter from Albertson saying that they wouldn't be accepting price hikes from brands due to tariffs. I also saw, think it was just today that Walmart announced that some items will be seeing price hikes due to tariffs. And I think like even retailers, right, they're going to be affected by this. They're trying to figure out how they're going to navigate as well.

Yuval Selik (04:57)
Walmart.

Yeah, for sure. 100%.

Jordan Buckner (05:08)
I'm curious though, like, you know, just makes me think sometimes in business it's beneficial to be decisive quickly in terms of making decision and moving forward sooner rather than later. At other times it is better to kind of wait and see once some of the dust settles what's going to be a long-term effect, what's going to be a short-term effect because right, like we saw some of the tariffs on China up to 134 % or something in a week and then maybe by now I

think the last was like back down to 34%. So if you increase 134 % to match and then there's this decline, how do you like the, you're just going to see a whiplash. And so how do you recommend founders? Like what is that time? Do you think just from being a founder of waiting and see before reacting too fast, but also not reacting too late.

Yuval Selik (05:55)
It's a really tough one because you just never know, right? mean, any decision you make, you just kind of got to go with it. I think right now the biggest issue is a supply chain issue more than anything else. If you have containers waiting at the dock and there's issues with supply chain, that's going to affect you not just in pricing-wise but also in inventory. It's funny, I ordered a grill.

from Kickstarter and they just were ready to ship the grill and I get an email. Sorry, we're not shipping for the next few months because we don't want to pay the tariffs. So that damn grill is not going to come for another few months and I've already been waiting for a year. tariffs definitely seem like another unavoidable cost, especially for smaller brands with tiny budgets. But again, I just challenged that mindset. think that tariffs can act.

like a stress test. They're pushing smaller brands to innovate faster and smarter. And the advantage that smaller brands have over the larger ones is agility. They can often pivot suppliers or find domestic sources much faster than a larger brand. But I think the key though is you gotta move thoughtfully. Quick rash decisions can backfire. And you know that with

with business, right? The first reaction is just, let's do something and it's going to hurt. So I think successful brands, they will carefully evaluate their supply chains, their pricing, their inventory, their backend office, their deductions, I mean, all of it, right? And they're going to find realistic options for diversification and then potentially implement those strategically. And I think, you know, God forbid you say the word strategy.

Jordan Buckner (07:29)
Strategy, what? It's just reactionary. I mean, I'm curious too, right? Like a lot of our brands, their biggest true customers are going to be distributors. How do you, these changes that are happening affect what's going to happen with distributors, right? Like if you're a brand you don't need to delay your packaging order or decide to, and you might go out of stock, you're going to see additional charges for that. Like what are some of those relational things that do get affected in working with distributors?

Yuval Selik (07:30)
Yeah.

Yeah.

I mean, we're starting to see it, mean, tariffs and other costs increases, right? And that shows up, guess where? In your check, in your payment. And those are the deductions. And because we manage deductions for a lot of brands and we see, you know, the whole picture from start to finish, these deductions are aggressive. And distributors and retailers, I can guarantee you, are not eating up the cost.

if anything, they're passing extra costs on, potentially costs that we've never seen before, right? And they do it through higher handling charges, increased freight costs, compliance fees that we've seen a lot. We're just seeing more deductions explicitly labeled actually as tariff related freight charges. I've seen that recently, which is like, whoa, I haven't seen that in a while. But many brands

I think the problem with many brands is that they get blindsided by these because deductions can be buried in confusing invoices, vague descriptions. And the problem is it's not just a minor inconvenience. These deductions can quickly erode profitability if brands are not managing them effectively. on one hand, you're getting additional costs. On the other hand, you're not even understanding what the costs are. That's even worse because you're flying blind. So having a solid deduction tracking

system in place, you don't have to use Promomash, but even your damn spreadsheet, make sure you're looking at it, make sure you're managing it correctly. I just had a conversation with a brand, not a small brand, literally not a small brand. My first question to them, well, what kind of deductions are you seeing? I don't know. I don't know what to tell you. This is what I preach every day and it just still shocks me.

Jordan Buckner (09:26)
Yeah.

Yuval Selik (09:30)
You know, I created a pro-mass to solve a problem, but then it still shocks me after all these years that brands do not have a handle on what they're spending their money on. And it just happens to be their second largest spend.

Jordan Buckner (09:43)
Well, I'll tell you, I mean, you know as

well, right, we've talked about this deductions and that is in that weird spot between sales, marketing and finance. It requires like three different mindsets or parts of the organization to work together to figure that out. And for better or worse distributors found that not, you know, not as all purposeful, but like found, you know, that's the whole that they're like, okay, there's not a clear one person's responsibility who clearly understands the entire picture that can see like, okay, this is a problem. is not.

And so a lot of things slip through. lot of people are like, oh, that's not my job at so-and-so's job. Let's put that in a meeting for next quarter. And these things never get done.

Yuval Selik (10:18)
But you know why? It's a very simple reason why. They don't have a single source of truth. They have an ERP, they have a bunch of spreadsheets, the brokers have a spreadsheet, the finance manager has spreadsheet, the planners have a spreadsheet, the demand planners have a spreadsheet, sales folks have spreadsheets, and none of them talk to each other. Well, good luck. I don't know what to tell you.

Jordan Buckner (10:37)
Yeah. Well,

and you know, I was shared with, uh, TeaSquare wasn't, you know, from terribly at fees, but we kept getting all these fees over like a little bit, every single check. And when we added it all up and ended up being like 30 % of everything that we sold to this distributor was charged back to us and various fees. And it was just like, wow, like that's not a business that we were running at that point and had no idea because it doesn't come all at once. It happens in these small little increments and cuts every single time, which you know best. And so.

What are some of those things that brands should probably be doing to review what's going on with their deductions, their pricing, to make sure that they know what's going on with their distributor partners, what the chargebacks are, and how to think about managing those moving forward?

Yuval Selik (11:22)
Well, the first thing is, again, I'm gonna try to be a dead horse here. Many are not even tracking deductions, if I'm being honest, or not well, right? I think the problem is they're relying on manual processes like spreadsheets as we discussed, but that's just not sufficient. They just need tools. They just need tools to understand what's going on. need the right folks with the right experience.

The problem is these charges just slip through unnoticed, right? They're silent killers and they're chipping away at margins. when you're talking about tariffs, that's an additional burden above an additional burden that brands are towards. No wonder 80 % of brands fail. the reason why Luvala failed was because of the 2008 crisis.

Right? Financial crisis. And it happens all the time. So if you're not running your business effectively and you're not tracking and improving and becoming an efficient business and if margins aren't the first thing that you think about when you wake up and the last thing before you go to sleep, then anything that happens in the market, I mean, anything in the world that happens and you can wake up. founders are a breed of their own because they write a business plan with hockey stick projections, right?

with timelines that are 10x the reality of what's going to happen. They try to raise funds, they leverage themselves, they put so much pressure on the business when it doesn't have enough foundation to succeed. And then they wonder why they fail when anything happens in the marketplace. I mean, that's the reality. This is why you and I preach what we preach because it's not, don't hate the game.

I mean, that's the reality of it. I mean, you have life. You get up in the morning, you're to get kicked in the nuts. That's you can't get out of it. I mean, that's what it is. But if you have a protection, you know, then even a kick in the nuts is going to be a little easier to handle. But otherwise, you're to be on the floor like like I was sucking my thumb. That's the reality of

Jordan Buckner (13:16)
You know, I think that's a good point because for better or worse, seems like these economic shocks broadly, whether it's COVID, whether it's tariffs, like some are person-made, some are government-made, some are just natural-made, like they are going to continue happening. And I would argue that they're probably going to start happening more frequently. And it's going to continue this trend of every couple of years, there being a upending event that's going to stress test your business.

And you made this point earlier, how do you make a robust business to be able to survive as many as these shocks as possible and so that you can navigate these changes? And I love to hear kind of more on that in terms of what are those things that you can do to build a better robust business so that whether it's tariffs or the next thing that's going to happen, your company might have to pivot a little bit, but it has the best chance of navigating through it.

Yuval Selik (14:07)
Well, I think we've got to look at more of what mistakes are these founders making. Because building a business is foundational. And I don't care what business you have. If you follow the formula and you do it right, you have a great chance of succeeding. The problem is mistakes that brand founders make or teams make. just in terms of

tariffs as an example. I was just talking to somebody about some of the mistakes, right? So the biggest mistake, and because I want to keep it to the tariff discussion, the biggest mistake that I see, mistakes that I see founders make is raising prices without clearly communicating the reason upfront, right? And it happens when potentially other things happen. For us, it was a euro.

distortion back in 2008. We started off with 1.1 conversion from the euro because we were buying from France and then it became 1.6. What do you do? It's the same thing, tariff, prices. So that's the easy route though for us, it was to raise pricing. thank God we were in skincare because the only better margins you have is illegal substances.

Jordan Buckner (15:07)
That's huge, yeah.

Yuval Selik (15:18)
So we had enough margin to sustain without raising pricing, but that was the first thing we talked about as a team because they're like, oh, know, $65 eye cream and whole foods. Let's just do 80. You know, why not? We're just throwing pricing around. the problem is when brand surprise retailers or customers with some price hikes or changes, right? It can seriously damage trust and brand perception, right? Cause transparency, I think in just in general in business, but

When you're dealing with a shopper, transparency is critical. You need to explain exactly why you're changing stuff, why you're adding products, why you're removing products from your lineup, why prices are going up, Ideally linking it to unavoidable circumstances like tariff, right? You mentioned Walmart. They're going to raise pricing. I think that's a shame. I think it's gonna hurt them because they have enough margin.

to sustain a temporary, because I think this is gonna be temporary, a temporary tariff hike. So Albertsons, I think is gonna get a win. Walmart, I think they're going to get hit, but we'll see. Go on.

Jordan Buckner (16:18)
I think

the other thing that's just in there, which reminds me of having that margin that you mentioned with your skincare brand to absorb it. So many founders operate from a mindset of, all right, we're going to have a slim margin at the beginning, but we are going to make more as our business scales and we get economies of scale. And right, as you see, like you might get up, save a little bit on some of freighter ingredient costs, but as you grow, you're going to get.

Yuval Selik (16:23)
Yeah.

Yeah.

Jordan Buckner (16:43)
more cost to your business that are known, like promotions, deductions, all these things are gonna happen. And it doesn't provide you any cushion for other economic changes that might happen like tariffs or the next thing that might come.

Yuval Selik (16:55)
Let's

talk about that margin, right? There is absolutely no benefit to being the second cheapest on the shelf. Zero. Okay? So what do they do? What do the brands do? Well, they price it to be as least expensive as possible, but they'll never be the least expensive because there's always a big conglomerate that has sufficiency in their pricing. So they're always going to undercut you. So now you're the second or third.

least expensive product and you're in this red ocean competing against everybody and just chipping away at your price until you go bankrupt. So if you actually can learn anything from skincare or beauty products, we had an 85 % margin with some products, right? Which is insane, it's great. Even after getting into retail. So...

The problem though, we were very expensive. We were in Whole Foods and we were selling $65 eye cream while everybody else was selling $20 eye cream. But your goal as a company is not to try to fight pricing, the pricing game. It's to show where your value is so you can be the most expensive on the shelf. Because if you're the most expensive on the shelf and there is a market for that,

product and you can convey why you are the most expensive, then you win. Because you're going to have the margins to sustain it, right? If you think about Apple, Apple has the very small percent of market share, but they're the number one most profitable company in the world. Why is that? Because their margins are incredible. That's why, because they can charge a thousand dollars for a phone that no one would even dare charge 300 for. So that's the problem.

Jordan Buckner (18:14)
Yeah.

Yuval Selik (18:27)
but they've done a good job. Their messaging, and every brain should learn from it, their messaging was on point. They knew how to deliver value instead of features or product.

Jordan Buckner (18:36)
Well, you know, it's interesting because I think that same logic applies from this called the computer category to in technology category to grocery. The problem with grocery, there's dozens of very similar products on the shelf, but they all get hit with that same consumer behavior. And most brands end up playing in that middle ground area, right? If you're selling pasta sauce, there might be 10 to 20 other pasta sauces.

on that same shelf, let alone hundreds or thousands of varieties across the whole country. so there can only be one by definition that's the most expensive or the least. And so what happens to those dozens of or hundreds of brands in between?

Yuval Selik (19:15)
If another brand comes to me or a founder comes to me and says, you know, I got to get a idea. I'm going to, I'm going to launch a water company or a bar company or a coffee company or a kombucha company. I'm like, please no, just please just don't do it. Just don't stop. Stop the madness.

Jordan Buckner (19:23)
No one's ever done this part before.

There is, because I think there is, I mean, I get there, I'm a huge advocate. think there should almost, I like innovation, but there's too many, a lot of categories are over saturated with products that there's not enough demand to run a sustainable business there.

Yuval Selik (19:47)
It's

not even that it 99 % of them are me too. Literally 99 and and liquid death me too, but with great marketing which made them stand out. Right. The marketing is what allowed RX bar and liquid death right to launch. Innovation is the poppies out there, right? The CETA is out there that launch a brand new category within an existing very successful category.

And then have the chops and the marketing budget to actually withstand all the issues, know, that are like tariffs and others that come about because they put the margins in place, but they're also unique. they're, I mean, how much is a poppy compared to everybody? I mean, I'm buying a four pack. like, I got to take another mortgage. I mean, seriously, it's expensive, but when you have value, you become an amazing company that sells to Pepsi. We already have, we have three companies that sold to Pepsi from Promomash. We have a new tagline.

Jordan Buckner (20:38)
Thank

Yuval Selik (20:41)
First, Pearl Mash, then Pepsi. We have siate, we have poppy, and we... Well, we'll see. From your mouth to God's ears.

Jordan Buckner (20:43)
I love it. Pretty soon Pepsi is going to come for you. Yuvall, as

we're wrapping up, what's a final tip or suggestion that founders should do as they're looking at their businesses right now? I know we talked about margins, we talked about looking at their supply chain. Anything else that you recommend founders should do as they're navigating a little bit of confusion right now?

Yuval Selik (21:08)
Look, I'm just gonna end it here. we talked a lot about tariffs today. I genuinely understand when there's a significant tariff, 30 % plus. It hits, it stings. And many brands genuinely have no choice but to make tough decisions. Because I've been there myself, I told you about Luvala, 2008 financial crisis, $1.60, $1.60 to the euro, it crushed my young brand and that's why I went out of business.

So there's very little that many brands can do. But sometimes, here's my tip for them, right? At least as a learning experience from all the scars that I endured over the years. Sometimes external pressures genuinely are overwhelming, there are also lessons and innovations that come out of it, right? So the hard truth.

especially when tariffs are temporary, right, or manageable. They're not your biggest long-term enemy, right? Your biggest risk is internal complacency, I think. Tariffs just grab the headlines, they trigger panic, sure, right? But systemic inefficiencies like overlooked distribution, sorry, distributor deductions, or poorly managed promotions, sloppy retail execution, you that drain your margin every single day.

year after year after year, right? These silent leaks, and this is what every brand should look at, the silent leaks that cost these brands millions of dollars, and what they do is they just sweep them under the rug. And that's the biggest issue. if I can have, if there's a takeaway, look under the hood. Don't sweep it under the rug. Don't blame marketing, right? Don't blame sales. Get together as a company. Unite.

Erase the silos. Sit down. Look at a single source of truth. Understand your business. Understand how you can withstand.

black swan events. And if somebody tells me that there's not going to be a black swan event coming up in the near term, and drive to your house telling you it's going to happen, you got to that's the beauty about having experience, right? You know, it's about to happen. So if you don't prepare for it, then it's on you. Don't blame the don't hate the game. Telling you so

Jordan Buckner (23:16)
Yuval,

this is fun as always. Thanks so much for being on. To our listeners, if you have no idea what you're being charged through deductions, definitely check out Promomash to be able to manage your business so you know where these costs are coming from. You can fight invalid deductions and better manage your trend to make sure that every dollar you're spending on marketing is paying off strategically how you want it to. Definitely check it out. Yval, thanks for being on.

Yuval Selik (23:40)
Always a pleasure, my friend.