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Guest: Kelly Costello, founder of Puppy Cake.
Host: Kevin Mako, founder of Product Startup and the leading expert in hardware startup consulting. A hardware entrepreneur since 1999, Kevin has advised more than 1,500 founders and built and scaled MAKO Invent through its acquisition by TriMech in 2024.
Launching a Food Product in Five Months
Kelly Costello shares how a lightbulb moment became Puppy Cake, an all-natural cake mix for dogs launched in five months with less than $5,000. She also explains why the company chose in-house manufacturing and how the product reached Amazon.
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Filip Valica: Hey, everyone. Welcome to the Product Startup Podcast, a podcast that helps bring your product idea to life by chatting with successful inventors, product designers, and other industry professionals. This podcast is run by Mako Design
Filip Valica: + Invent, and hosted by Filip Valica. Our goal here is to get to the bottom of what makes a product successful, from initial idea to putting your product on the shelf. We're taking you step by step to build a functional product and scale your product business. Now onto the show.
Filip Valica: The Product Startup, Episode 13. Welcome to the Product Startup Podcast. helping you turn ideas into successful products step by step with your host,
Filip Valica: Filip Valica.
Filip Valica: Hi, everyone, and welcome to the product startup podcast. In the last episode, I did a highlights reel where I compiled their top tips from other product founders. We've had a lot of new listeners joined since I started the podcast back in March,
Filip Valica: and I wanted to create a quick recap or highlights episode to cover the most important points other product founders have shared with us. So mainly we talked about the different ways each founder has validated their ideas and confirmed that there was a market.
Filip Valica: That's probably the number one email question that I get. And two, we talked about each founder's best tips for bringing a product to market.
Filip Valica: So if you're stuck or you have an idea and don't know what comes next, I recommend that you listen to this episode to help you take that next step. So now on to the show. In today's episode, I'm joined by Kelly Costello.
Filip Valica: She's the owner and founder of Puppy Cake. you may have seen her on Shark Tank.
Filip Valica: She created an all-natural cake-mix product for dogs back in November 2007, and it quickly became the number one selling cake mix for dogs in the U.S.
Filip Valica: She sells both direct and wholesale, and we talked about how to lower the barrier entry to get either customer to buy.
Filip Valica: We also go over the importance of creating new products instead of just adding new versions of the same thing, and she shared with us a mistake that she made working with a large customer that almost put puppy cake out of business.
Filip Valica: Kelly has really great energy, and she's super transparent about her nine years of
Kelly Costello: ups and downs to get where she is today. So I know you'll be able to put some of her advice to practice right away. So let's get started.
Kelly Costello: Hi, Kelly. How are you doing today?
Kelly Costello: I'm doing pretty good.
Filip Valica: We were a manufacturer of maple bacon ice cream today.
Filip Valica: And at the end of the day, one of our machines broke down. So the day has not quite ended yet, so we're still working on that little issue.
Kelly Costello: Well, hopefully we can, after we get off the interview, you can go and wrap that up. So why don't you tell everybody a little bit about puppy cake and how you created it or how you started?
Kelly Costello: So puppy cake manufacturer specialty dog treats and our best selling products are the cake mix for dogs and ice cream mix for dogs. And the cake mix for dogs was the product that I displayed on Shark Tank in season three.
Filip Valica: And since then, we launched a cookie mix for dogs. Pup potato chips, jello for dogs. And then the second most best-selling product I have is the ice cream mix for dogs. And when I launched that, it essentially doubled my business.
Filip Valica: Wow, that's amazing. So I do want to get into all those products at some point, but maybe you can take a step back to your very first experience when you said, you know what, I want to commercialize this.
Kelly Costello: There's a lot of people that take recipes and play around in their kitchens and say, okay, I'm going to make this for my dog or my friends or maybe. even the local kennel and nonprofit,
Kelly Costello: what gave you that spark to say that now you're going to scale it and create a product that you can sell nationally? So I was working for a sales and marketing firm, and one of my clients was Smuckers, who owns Pillsbury baking mixes.
Kelly Costello: And I was looking at their cake mix advertisements like all day. And I thought, oh, wouldn't that be great if they made that for dogs? And that was kind of my lightball moment. I wasn't really that happy with my job at the time. And I think I was really looking for a new direction.
Kelly Costello: And so once I had that bug, like, I couldn't stop thinking about it.
Filip Valica: And that was the end of July when I came up with the idea. And by mid-November, I actually had a website product that was ready for the shelves and had my first sale.
Kelly Costello: And so to turn the idea into a product, first thing I did was research canine nutrition and figure out how can I make a cake for dogs.
Kelly Costello: so that's pretty smart because you didn't it's not like you came in from a particular background you weren't a vet did you have any cooking experience prior or were you doing treats and baking things for other people before not particularly um i don't know if you're familiar with
Kelly Costello: the book emith which is a really okay so it's a very popular book for new entrepreneurs and i highly recommend um any entrepreneur at any stage read it and uh it talks about how people who go into
Kelly Costello: business like a plumber who goes into business to be to have a plumbing business he then learns he
Kelly Costello: does 10% plumbing and 90% running a business so I was not part I wasn't really a baker or was someone
Kelly Costello: who spent hours in the kitchen baking um so cake mix is actually kind of fit me better because that's what I prefer to use anyways so but the baking and the manufacturing part of it it's not really what
Kelly Costello: drove me to do it is more I wanted to be in business very cool and you saw a need that was being unmet and you decided you know what I'm just going to chase this and see how far it goes right yeah I did
Kelly Costello: check to see if I had any competition checked on Amazon um so this was back in 2007 Amazon wasn't quite as big as it is now but uh search all over the internet for any kind of cake mix for dogs and I found
Kelly Costello: one potential competitor and I ordered it and it was just had no icing package
Kelly Costello: terrible packaging,
Filip Valica: only one flavor, and it was really expensive.
Kelly Costello: I'm like, okay, I can do this better.
Filip Valica: So that was my green light. Like, there is a market for it, and I can do it better than what's currently available. So what did it taste like?
Filip Valica: I didn't know.
Filip Valica: You know what?
Kelly Costello: I actually, like when I got it, like I just, the packaging was so lame. I wasn't even motivated to want to make it. Wow. I was like, it's just a cake, so you don't even get the icing. It was just sad. Yeah, it was sad.
Kelly Costello: So from July to November, then, you said you were able to even get a product launched at the end of November? Yes, and a website. Wow. That's amazing.
Kelly Costello: So were you working with a copacker or did you just start creating mixes yourself and ship out of your home? Or how did that work? So I've always done all of our manufacturing in-house.
Kelly Costello: And at that time, it was literally in my kitchen and putting it. together with a kitchen aid mixer you know like those ones so you get it for a wedding present
Kelly Costello: right and mix that at home and the biggest challenge i had once i developed the rest because i mean that was that was quite a lot of effort to understand am i providing a healthy product and to find the
Kelly Costello: data to support that was finding a company that was willing to make boxes for me on but only make like a thousand of each flavor right without paying two dollars each or something well i ended up paying a
Kelly Costello: dollar 10 each i mean that's yeah so expensive i mean now we're paying significantly less than that
Filip Valica: and it keeps getting better you to hire the volume but so i end up paying like a dollar 10 a box because i thought to myself well what if i'm wrong you can be so passionate about something and then
Filip Valica: find out you're wrong so whenever i talk to other entrepreneurs i tell them do not invest more in the first year than you are willing to never see again so don't invest 30,000
Filip Valica: thousand dollars that was supposed to for your retirement or for your child's education if because those are things that you may never see and the reality is a lot of businesses fail and I've
Filip Valica: talked to other businesses that unfortunately did fail because there just wasn't a market for it
Kelly Costello: and sometimes you can be so passionate about something but you might be the only one right yeah other people don't feel the same way I appreciate you sharing that I think that probably the number one and two question that I get is you know I have this idea
Kelly Costello: What step do I take next? And then the next question is, well, I have this prototype and how do I solicit some wealthy investor to sponsor me? And my answer to that is, well, you know, if you had a market, you probably wouldn't need that wealthy investor because people would be kicking down your door to buy your product.
Kelly Costello: And somehow you would find that money or you would be able to make it work. I think people are trapped in this mindset that they need $30,000, $30,000, $100,000 before they can even start doing anything. And so it's really great to hear that you were able to do that just on a shoe string.
Kelly Costello: I think I spent just to get the product launch because I tried to do things as cheaply as possible because I was thinking I could be wrong.
Kelly Costello: And so I did, I got a, I paid $1,000 for puppy cake.com and then the boxes end up cost to me about $2,500.
Kelly Costello: And then the ingredients were like,
Filip Valica: and baking ingredients are very cheap and readily available. So I probably spent $300 or $400 on that. So less than $5,000 just to get it. Less than $5,000 to launch it and to sort of get that proof of concept. How are people reacting to it?
Filip Valica: Am I seeing reorders just trying to get to figure out, like, is this a business? That's excellent. And I think that there's,
Filip Valica: for what I did, it wasn't, it didn't require that much money to launch it. Now, someone who's doing something that requires like molds and things like that, I mean, that is really like, do your homework. That's why I tell it.
Kelly Costello: every hour that you spend planning out your business is going to equal probably one month faster getting to profitability.
Kelly Costello: The more time you spend planning your business before you spend a dime, you will get so much more out and figure out what your market is. That's true. And maybe planning for some of the contingencies or some of the alternate ways of doing
Kelly Costello: something because there's certainly more than one way to go to production on almost any product. No, that's fascinating. I think there's also the other side.
Kelly Costello: This is my Achilles heel, I guess, as I'm an engineer, I'm very detail-oriented, and I can get lost in that detail and in the planning. And at some point, you have to take that action.
Filip Valica: So I guess there was some point where it just clicked for you and you said, you know what, I've done enough. And now I just need to do it. Like, was there any impetus to say go? Or did you just say, okay, you know what? I have this $5,000 that I'm willing to risk and let's see how far it will take me.
Filip Valica: I had just this burning passion. I couldn't ignore it. I had to know whether or not I was right or if I was wrong. Like, do I really have a business here? Can I make a living doing this? Now, looking back, I was very naive as to… We all are.
Filip Valica: So true.
Filip Valica: I, you know, coming from having clients like smuckers and you see like the Nielsen data that shows you how many units are moving per store,
Filip Valica: that's the mentality that I had going into it.
Kelly Costello: And I truly believed that we would be pacing at a million dollars after the first year. And when I think back on that, I laugh. I mean, that's just completely ridiculous.
Kelly Costello: I had no idea how I was going to scale the business from my kitchen to a million dollars a year. And I didn't spend the time thinking about that. Well, but, you know, that's a common misconception, I think.
Kelly Costello: A lot of the business plans that I look at as an advisor for a local business plan competition, they'll start and say, well, the market is X and we're going to enter the market with 1% market share. Right?
Kelly Costello: And you say, okay, how? Like, what led you to that 1%?
Filip Valica: And they're just kind of making an assumption and then going off of those numbers and their entire plan is based on hitting that 1%.
Kelly Costello: So I can totally see how there's so many dog lovers in the U.S. X% give them treats. There's no other alternatives out there on Amazon. on, I bet I can, you know, get 50% of the market or whatever it is, you know?
Kelly Costello: I mean, that sounds really good. It sounded really good. I have learned that you really have to spend the time imagining how is this going to go. Okay, so I have my product. Like, let's say the cake mix for dogs.
Filip Valica: Okay, so I have my cake mix for dogs. What's my price point going to be? How did I come to that conclusion that the price points would be $6.99?
Kelly Costello: Okay, so you need to have data behind that, answer that question. who is going to buy that. And a lot of times when I talk to entrepreneurs who are young, I say, who is your market?
Kelly Costello: And they start saying, well, we think it'll be blah, blah, blah, and women who are da-da, and I stop and I go, okay, so you're telling me you don't know who your market is. That's the first thing you need to do, because why spend a dollar in marketing if you don't know who you're marketing to?
Kelly Costello: Or it's a really broad range, you know, men and women from 24 to 54. Yeah.
Kelly Costello: Figure out, because you have very little dollars when you start a business. figure out what market can you make the most money in and what we found was women who own dogs
Kelly Costello: before they have children and so we hit that market because that was the the low-hanging fruit and when you're small you just need to get the cash in you need to build a market like don't
Filip Valica: be like we got to get everybody no just go who is like the easiest one when you put a dollar into marketing to that customer you get more than a dollar out right yeah what's your chance of conversion with what audience that's really interesting do not have
Filip Valica: children how did you get to that final point so after we had been on the market for like two months and I had a couple hundred customers at that point I did a
Kelly Costello: survey and offered them a gift certificate to a well-known retail pet retail like pets water petco and we got quite a few participants I was very very happy to have gotten this many participants and I have a marketing background so I felt
Kelly Costello: confident in creating a 10, 10 question survey that would not have leading questions or bias questions. And so that's how we found out that like, wow, there's like no men buying our product. And they're all women.
Kelly Costello: And I started looking at the age group, like, this is definitely women who either haven't had children yet or are empty nesters. But because we are doing a more technology-driven marketing plan, because all we had was
Kelly Costello: stuff on our website, we focused on the younger demographic because they were easier to too. Kudos to asking questions that weren't leading questions, because that's the second thing people will usually do, is say, here, I've made this widget or I have this idea, don't you like it? Yes, no.
Kelly Costello: Right? Right? And everyone says yes, and you're like, woo, I'm going. Yeah.
Kelly Costello: Winner.
Kelly Costello: You know, and also, congratulations, two, three hundred customers, a couple months out of the gate. That's amazing.
Kelly Costello: That really says something to your product. That really means that you've tapped into something, I think. Yeah. And then I started to try to figure out, okay, how.
Kelly Costello: can we increase our conversion rate and what is consumer behavior? So I'm really big on educating yourself. So one of the books I read was don't make me think and try to optimize our website.
Kelly Costello: And then I remember talking to a friend who was saying, if something offers me free shipping, I am much more motivated to buy it if I can get free shipping. So I said, okay, well Amazon, like let's
Kelly Costello: not reinvent the wheel. Here's a very successful company, Amazon.com, and their free shipping freshen at the time was $25. So we offered free shipping on orders of $25 or more. Our average order size went from $11 to $27 overnight.
Kelly Costello: Yes, awesome.
Kelly Costello: So it's like little things like that of just trying to understand the market, understanding consumer behavior can have major impacts. So we focus heavily on getting consumers because getting into the retail game is a very
Kelly Costello: different animal than just selling to people on Amazon. or our website, pubbycake.com.
Kelly Costello: So we just try to get that low-hanging fruit of consumers, high-profit margin, and just keep getting the base. Plus, they'll go into stores and say, like, hey, I really look at this product. We add it. So once we started pursuing the wholesale market, I got a whole new education.
Kelly Costello: The wholesale market is a very different animal. Retailers expect to make a certain amount of points.
Kelly Costello: When I say points, I mean per cent. So they expect to make a very different animal. make a certain percent off of the product. So like if the final price is $6.99 and I and wholesale prices are
Kelly Costello: close regarded secrets, but they expect to make a certain percentage off of that $6.99 that goes across their register.
Kelly Costello: And so whenever I first started selling it, I didn't know how many units are a typical independent retailer, pet store retailer would go through. So we had case sizes of like 84 for one
Kelly Costello: flavor and thankfully one of the retailers like could recognize that we were new to the game and she gave me a brief education she said these case sizes are way too high like we need you get a little bit
Kelly Costello: lower i'm like oh okay so what what is the typical case size i'm like 12 i was like 12 okay so again i had two skews then so what we did to eliminate one of the barriers of entry is um shipping is a barrier
Kelly Costello: of entry for retailers and minimum order is a barrier for retailers. So we did an assorted case of 12, so six banana and six care with free shipping. And we still made money off of it. And we got our
Kelly Costello: product into stores. And I tried to stick with that mentality and that kind of plan for a while. And it really, it was okay, but not good enough. Because as we added more products, I learned that If I sell in Eaches,
Kelly Costello: I open the door to even more retailers because now there's even fewer barriers. They can literally try one red velvet cake mix, one banana cake mix.
Filip Valica: I want four of the maple bacon ice cream and four of the peanut butter ice cream, and I still get free shipping. So I get the product into their store with a small, like $50 order, but then I always get reorders.
Filip Valica: So if that barrier of entry is trying it and they want to spend very little bit, money to try it,
Filip Valica: we package our products so that it's easy for retailers to get into the store.
Kelly Costello: I've talked to other companies like Bowser Beer, and I know the owner there, we were acquaintances
Filip Valica: if we spoke a few times over the phone.
Filip Valica: And she has asked me, like, how can you afford to do free shipping? I said, well, I'm selling them directly.
Filip Valica: The extra effort it takes for a retailer to go to my website and place an order or call me up and place an order. versus pulling out the catalog from their local distributor and checking, check, check, check, check,
Filip Valica: spending two hours on their entire store if they order just from one distributor.
Kelly Costello: If I'm asking them to order directly from me, so they have to call me, and they have to go to my website and spend extra time.
Filip Valica: And so their motivation for doing that is they're going to get a good price and free shipping.
Kelly Costello: So that's all we offer free shipping because it's the only way to grow this business. And it has worked really well for us. So we have free shipping for orders of $50 or more for retailers. and we sell in each is, and it just makes it so easy to get our products into the store.
Kelly Costello: Just try it. That's all we're trying to say. Just try it. And all we're asking you to do is spend
Filip Valica: 50 bucks. Wow. So good on you for getting into stores. That's usually a really hard step to take. I'm going to take a few steps back. You just covered a whole lot of material that I think is really
Filip Valica: interesting. So started talking about the margin that retailers like to see. In my experience,
Kelly Costello: with products, people like to see 25 to 50% margin. I'm not sure what it is like in food. Is that the rough range?
Kelly Costello: Well, pet products, it's higher than food.
Filip Valica: Grocery store margins are really slim, right?
Filip Valica: So I think, I guess it's just, what you're saying is it depends on the industry. There is no rough. So if you're a,
Filip Valica: if you're trying to create a product and you need to, you've created the price first because you want to see if you can compete at that price point.
Kelly Costello: What's a good rule of thumb to say that you need to keep all your costs down to? In your case, specifically, you're not using a distributor. So that gives you that allowance, I guess, to like you said, you're able to come in at a lower price for wholesale. But is there a rough number?
Kelly Costello: Your costs,
Kelly Costello: like including your labor and always include your labor,
Kelly Costello: should be 25% of your retail price. Regardless if you're using a distributor or not. Yes. And if you can't get those margins, there really is no point in going into business.
Filip Valica: I know everyone thinks it's not going to happen to them, but they're not going to be the company that goes bankrupt or fails, but it happens all the time. It's like 90% of businesses fail within the first five years or
Kelly Costello: the first three years. I mean, it's very high. It's very hard to get to that five-year mark. That number that you threw out, that 25% is in line with, I've got a couple products in
Kelly Costello: Amazon as private labeling products, and so our landed cost for a lot of those is 25%-ish, because Amazon will definitely take a hefty cut. Yeah, Amazon basically is like, even if you're using fulfillment by Amazon, it's as if you're
Filip Valica: selling to Amazon because they basically take a little over 50% of the MSRP, just like similar to what you're selling wholesale. It's actually, yeah, it's really high on lower price products, less than $10 products. I'm not even sure how people make money on.
Filip Valica: because Amazon takes like a $6 cut on a $10 product.
Kelly Costello: Yeah, it's quite high on fees. Like you said, you know, people want that convenience and they have prime memberships and they want stuff in two days. So that's interesting. Do you have an Amazon presence? Yeah, we do. Actually, we sell a lot on Amazon.
Kelly Costello: So I had originally just sold on Amazon, not used to selling by Amazon. And then I thought, well, I was a prime member.
Filip Valica: I was like, well, I mean, I buy so much stuff if it says prime versus, you know, selling buying it directly from the manufacturer or the seller so I said well let me try this and the the first time that you do it it kind of hurt your head there's just so many forms and it
Filip Valica: doesn't really make sense and it's hard to understand there's no one to talk to so I think I spent like two hours the first time when I sent in one case only two hours yeah yeah because it is
Filip Valica: it's a mess and you get it's really hard to get customer support and and they do take up a lot
Kelly Costello: in fees and it makes you think it's like is this really direction that I want to go with it but it's so worth it because we went from oh gosh it was probably a couple hundred dollars to
Kelly Costello: three hundred dollars on amazon to now uh thousands nice every month that's great so and just the
Kelly Costello: switch from uh selling on amazon but not using fulfill by amazon to using fulfill up by a month overnight.
Kelly Costello: I mean, I'm not kidding like overnight. My next month is completely different. Right. No, that's great. Part of their large fee is fulfilling orders for you and packing and placing things. And so you've kind of extended the size of your team. You pay dearly for that.
Kelly Costello: But I guess that's one part of the business that you don't really have to deal with as much other than just keeping inventory stocked. Yeah, I mean, we're getting, we sell so much Amazon. We're getting the point where we will actually be, you know, Amazon require a special
Filip Valica: UBC codes for their inventory, we're going to the point where it's making sense for us to have special. You have our red velvet and our peanut butter cake mix, have the special Amazon UPC code
Filip Valica: so that we can save that step that my employees are currently doing where they have to apply a label. Yeah, so you have packaging dedicated to Amazon, for example? Yeah. Great. We send you in a lot.
Kelly Costello: Some people might be hesitant to say, gosh, now you're selling in at least three channels that we've talked about online through your site, online through Amazon,
Kelly Costello: direct to wholesale.
Kelly Costello: Obviously, the margins vary to each channel. Is it worth it to have to deal with all three distribution networks? Are you getting enough margin to justify the third channel or fourth channel? I think so.
Kelly Costello: I mean, I think the way to grow a wealthy company is that you need to be making money in lots of different places. Not to the point where you're stretching yourself thin. And so there's kind of like a happy medium that you have to do.
Kelly Costello: But if you're making money and it doesn't cost you a ton of time or resources, like some of the things that I've considered launching, like we would have made money, but they would have taken up so much production hours here at the warehouse.
Kelly Costello: And we only have so many production hours every month that it didn't justify launching that particular product. Like we were thinking about launching a shelf stable cake.
Kelly Costello: So like we've got the cake mixes and then we're going to have a shelf stable cake. where the person who didn't want to spend the time making could just, you know, spend a couple more dollars and take something home.
Kelly Costello: But when we sat down and thought about the logistics, it was going to require so many man hours here and so much square footage every month that it did not justify its existence.
Kelly Costello: It was going to impede on our other manufacturing capabilities. And even though we would have been making money off of it, the intangible costs were way too high. for a solar job product.
Kelly Costello: Yeah, and that would have been a pretty big step chain. So can you kind of discuss how you made the decision to go from the cake mix to your ice creams?
Kelly Costello: And did you just expand laterally with cake mix and say, okay, we're going to cover all these flavors first and then going to ice cream? Or what was the thought process there? How did you decide that you know what ice cream is it?
Kelly Costello: Well, a colleague that I respect a lot and he's retired now, he had told me that just added, flavors isn't really adding a skew. Like, yeah, you're adding a UPC, but you're really not
Kelly Costello: adding a product. He said, you need to add products and diversify your portfolio. And something that Laurie Grenier also told me when I was on Chartang, she said, like, you need to have a line of products. And then my colleague had differentiated, like, product means something other than what
Kelly Costello: you're making right now, even if it's a different flavor. So the way I came up with the ice cream was that I originally, I knew our sales dipped a lot in the summertime.
Kelly Costello: So I see during breaking season, baking season is typically when it's cold outside and you
Filip Valica: don't mind turning on your oven. So that's baking season.
Kelly Costello: So September through March is baking season. It dips quite a bit in January as most companies sales dip in January.
Kelly Costello: So from April through August, I mean, it's like, it was like crickets around here, just barely
Filip Valica: selling anything and I was like I need a cold I need a summer product something that's cold so the first thing I launched was this jello for dogs and jello has benefits like that's good for brain health
Kelly Costello: good for joint health and it was fine it makes us money we still have it on and we're not going to get rid of it but it didn't fill that hole so then the next summer I think it was like july and I was
Kelly Costello: in here thinking I'm like man I wish that we could do ice cream but logistically that's a nightmare we can't do ice cream like it would be great if we get an ice cream next I'm like, wait a second. We already deal with yogurt powder. I bet you they make whole milk powder.
Filip Valica: I was like, what's ice cream? It's basically milk fat and sugar. Like, I mean, why couldn't we do that? We're all you have to do is add water. So that was in July. And six weeks later, we launched the puppy scoop's peanut butter first flavor.
Filip Valica: We kind of did it on a shoestring budget.
Kelly Costello: Again, let's have proof of concept before we invest thousands. We did, like, our labels didn't even wrap all the way around the container. It was just like, because to get a label. that wrapped all around the container and you had to get a die cut label and then you had to buy
Kelly Costello: 10,000. So like these are the things I deal with all the time at this level. Like how can we do
Kelly Costello: this cheaply and still actually look decent? So we we bought white ice cream containers and then
Filip Valica: we had labels that only went halfway around and then actually printed in-house the top label. So launched it in August and like huge response. Like, okay, this is a product that has
Filip Valica: legs. Now let's launch three more flavors. Then we launched carob, maple bacon, and vanilla. That's amazing. So then we went to the Global Pet Expo in March, which is the largest trade show in the United States, and it's a closed trade show. It's only for people in the industry.
Filip Valica: And
Kelly Costello: puppy scoops got second place for Best New Natural Product. That's amazing. Congratulations. That's awesome. Thank you. And like I said, when we launched a Puppie Scoops ice cream mix, it literally doubled our sales. So in July, we had a little party in the warehouse where,
Kelly Costello: where me and the employees celebrated surpassing last year sales. That's awesome. It's going to end up more than doubling by the end of the calendar year. Did you eat some of the food?
Kelly Costello: I've tried all of it. I mean, it's everything that, I mean, I would imagine everything that you have is something that people could eat, not that they would want to, but it has all natural ingredients.
Kelly Costello: I'm starting to think that there might be a potential market for powdered ice cream mix for really remote areas. Like, as long as you have a freezer, this has a nine-month shelf life when it's dry. and then at least six weeks in the freezer.
Kelly Costello: So like island countries where it's really hard to get ice cream, I mean, this is something that could possibly do it. But we're not set up for human consumption. So I'm just going to stick with the market that I'm good at right now. That's dog products. Well, and great.
Kelly Costello: And you touched on a couple things that I want to. I keep having to pull you back. I know you're covering all this great knowledge, but I've got all these kind of side questions. So when you say you launched a product, what does that mean? Did you go to your existing customers and say, hey, check it out.
Kelly Costello: We're making ice cream now, or was there another type of marketing push? Okay, so whenever I launch a product, I have the recipe, I have the artwork done, and so then I get whatever it takes to physically have a product with a
Kelly Costello: UPC code that's cannable and ready to go into a retail setting. So once I have that, and I've learned the lesson, don't pre-launch something, like only launch it when you can actually ship it. That's just for my personal experience.
Kelly Costello: That's contrary to what Tim Ferriss says on the four-hour work week. Just go ahead and put up a website with a buy-now page that doesn't really go anywhere and flood it with traffic.
Filip Valica: And through that, you'll be able to tell if people want to buy your product, if they hit the buy-now button, you say,
Kelly Costello: sorry, it's not available now, but then you'll be able to count how many clicks there are versus people that hit your page. And it was a low-cost way of testing whether a product would work or not.
Kelly Costello: And what I'm hearing from you is that that's not the way that you did it. Well, for us, going back to how we offer free shipping to wholesalers,
Kelly Costello: when we highly value having good customer service. We want our retailers and our consumers to have a great experience with us and feel very confident that we're going to take care of you.
Kelly Costello: If UPS runs over your package, you're going to be getting stuff sent to you right away, plus some things for you to try. Like, we really want to take care of our customers. So when we launched the carob chip cookie mix in spring of 2014,
Kelly Costello: we took pre-orders. But the problem with that is that we would ship most of their order and then pay to ship the carav-chip-chip cookie mix.
Kelly Costello: And so we had all these orders we had to just hold because they had ordered carap chip cookie mix, but we didn't have it in stock yet. So it created kind of a logistical nightmare here where we had to just have this big pile of order.
Kelly Costello: orders with highlighted carrot chip cookie mix, and then we end up having a paid double shipping.
Kelly Costello: So that's why I at Puppy Cave, we at Puppy Cape, do not allow customers to order things before they're ready. No, that makes sense. Once we, for like ice cream, I got my packaging, I've got my product.
Filip Valica: I've tested it on multiple dogs and like checked on the shelf life and shipped it to myself
Kelly Costello: to see how it goes. So when I launch, I sent an e-blast to all my retailers. I send an e-blast to all of our consumers.
Filip Valica: We put it on Amazon and get stock in there. We start asking bloggers to review it and put a link back to our site.
Kelly Costello: And we ask people to review the products and start getting some reviews on Amazon. And then a lot of times we'll do a postcard that's direct to retailers because mail still is very effective.
Kelly Costello: I love sending postcards. I put a dollar in to sending out postcards. I get $1.25 back just right away, and then I get new customers so that, you know, it has exponential benefits for the rest of the year where I'm making money off for that new customer.
Filip Valica: Do you find that snail mail works better for certain customers and others, a wholesale better than retail?
Filip Valica: I haven't personally tried to do snail mail for consumers,
Filip Valica: but for retail, I find that it's very effective.
Kelly Costello: the store owner of an independent pet store is a very mixed bag but it's usually more middle age
Kelly Costello: and
Kelly Costello: it's it's kind that you don't forget about and you can put on your refrigerator versus getting an email when we're inundated with emails every time so we like to have a really good tagline like so far ice cream postcard which has been very effective and has a good
Kelly Costello: sales lift and gets us new customers it says freezerless ice cream and like that That usually catches retailers' attention. Yeah, what do you mean by that? It's accessible. Right. And then it says, the consumer adds water and freezes at home. Okay.
Kelly Costello: So one of the things that surprised us about the popularity of the ice cream mix was that retailers love it because it does not take up a valuable freezer space.
Kelly Costello: In grocery stores and all stores, the freezer section, it's a very expensive section.
Filip Valica: And you have to justify that, you know, two by four inch space that you take up in there. And you need to be making a lot of money because it is expensive. It's expensive to maintain. It's expensive to ship there.
Kelly Costello: So you have to justify your existence. So if they can take a product out of there, they can still offer ice cream, but it's not in the freezer, and put something expensive in there that makes some good margins like raw dog food, which is very popular right now. It's a win.
Kelly Costello: Consumers see the treats, see the ice cream in the treat section or at the counter where it's an impulse buy. And the expensive raw dog food is, they can take, put one more brand in there because they know. no longer have ice cream taking up space in there anymore.
Kelly Costello: Well, and the shipping costs for you are lower, too. Yes, the water weight. They're making better profit margins. We don't have to ship it in a refrigerated truck. We don't have to ship it with dry ice. And we can offer them free shipping. So it's just like, sign me up. It's like an easy sale.
Kelly Costello: That's great.
Kelly Costello: That sounds really exciting. And so you mentioned that you didn't want to really go into people food because of the regulations.
Filip Valica: Are there any regulations around pet food? Yeah. The pet food industry is. is fairly regulated. We are inspected regularly by the Department of Agriculture here in Pennsylvania.
Filip Valica: We're registered in all the states we sell in at the Department of Agriculture in each individual state. And the FDA has some regulations on labeling and how you're
Kelly Costello: supposed to maintain your facilities. So it is fairly regulated, but it is not nearly as regulated as human like stuff for human consumption. Sure. So it was a relatively lower barrier
Kelly Costello: entry than making people food and an untapped market and so that was a good recipe. Can you talk about anything that might be coming up that you're working on? Yeah. Actually, we are working on something
Kelly Costello: that's like a complete 180 from what we're currently manufacturing. We want to launch a jogging leash and we've got a couple of prototypes that we're testing out now for quality and strength and durability.
Kelly Costello: It is a coiled leash that you wrap around your wrist instead of holding with your hand and just hook it on your dog and jog. And if the dog goes a little bit behind or goes a little bit in front or goes a little side, it doesn't matter because it never goes under their legs since it's
Kelly Costello: coiled like a foam cord. So as they move, it stretches.
Kelly Costello: It's like low impact on your body because you don't have that jerking motion. I'm pretty excited about it. We're calling the air leash. Nice. Because if it makes the connection between your dog feel like,
Kelly Costello: air. So we may be able to get in for Christmas, but we pretty much would have to pull the trigger in on that one in the next two weeks. And I'm going to Vegas at Super Zoo. It's another trade show.
Filip Valica: And I don't think we're going to be. I don't want to rush this, basically. So we're going to be launching it next spring for sure. Great.
Filip Valica: And that answers another question. Is it better to have the right timing and not the right product? Or do you want to get everything perfect before you launch?
Filip Valica: Yeah, I don't think that you should have, what does I say, great is the enemy of good or something?
Filip Valica: Something like that.
Kelly Costello: I don't want to be so obsessive over like everything, all the marketing materials have to be right. But I think having the product right is very important.
Kelly Costello: Like with our dog treats and everything, because if you start racking up bad reviews, it's really hard to come back from that. You know, if your marketing material looks kind of lame, okay, it looks kind of,
Kelly Costello: lame change it and put some new stuff but if i put out a leash that breaks after two weeks i mean i
Filip Valica: you can't come back on that absolutely so i'd say heavily focus on the quality of the product and then
Filip Valica: second to that would be being able to deliver that product so like have a pretty good idea of how you're going to manufacture that at a higher scale when you're at launch yeah all all good advice so
Kelly Costello: You mentioned this is another trade show that you're going to. I personally love trade shows because you get to scope out what the competition is, plus maybe talk to some suppliers and distributors and meet some customers.
Kelly Costello: Can you kind of talk about your experiences at trade shows and when did you first start going to them and why do you think they're a good use of your time? I think trade shows are fantastic.
Kelly Costello: There's a couple of caveats of that I didn't start going to trade shows until 2012 just because I couldn't afford them.
Kelly Costello: I spend over $5,000 on every trade show I go to. And the first trade show I went to cost a little bit more than that because I had to buy a booth kit and pay a designer to design that.
Kelly Costello: But even though I'm putting it $5,000 to these trade shows, I get it all back because you get to meet customers face-to-face and get that time. And every time you go, distributors and retailers see like,
Kelly Costello: okay, they're still here. So obviously there's something that's okay. And I can't tell you how many times I have retailers come up to me and say like, yeah, I've seen you a couple times and I finally wanted to talk to you about your products.
Kelly Costello: Or I'll send them like three or four postcards and they finally walk up to me at the Global PetExpo in Orlando and say, okay, I've gotten three of your postcards and I wanted to talk to you about your products.
Kelly Costello: I'm like, okay, great, let me tell you how our products can help you make money and keep customers happy. So trade shows are fabulous, but you really do have to put time into it.
Kelly Costello: It's worth it to spend the $1,000 to $2,000 on a booth kit because if you look janky, you could have a great product, but the perception that people have is that you don't know what you're doing
Kelly Costello: and that you aren't going to be offering a high-quality product or a good customer service. No, it's very true what you said where if you have to go, you show up several times in order for people to get a feeling that you're going to stick around
Kelly Costello: because especially your wholesale customers, I'm sure they're not going to try to take the chance on a product that they're not going to be able to carry again. You know, their customers might like it and you won't be around next season. Why should they invest the shelf space or the energy to order something? Exactly.
Kelly Costello: Very good points. And I had more than one colleague tell me, who are more mature in business than me, had told me that. They said, you've got to be here. You just got to keep showing up. Just keep showing up. And you'll be surprised eventually, just like the floodgates open.
Kelly Costello: And for us, that did happen, like last spring is whenever Pubby Take really hit the stride. And everything since then has been easy.
Filip Valica: Just it's, we can count on a certain number of sales. The profit margins are there. And the customers are there. We got a good solid growth. And so it finally got easy for us last spring. Good. Congratulations.
Filip Valica: And I actually expected it to get easier on you before now. You've been at it since 2007. Well, you started the end of 2000.
Filip Valica: and so now this is actually a common theme in the last few guests that we've had that have said it's taken them five or six years even though they've been on Shark Tank to get to the point now where they're growing faster organically can you speak to that a little bit yeah i mean i really made
Filip Valica: a lot of mistakes i just didn't really know what i was doing um and i'm not shy about it now because
Kelly Costello: it's better to just admit that you're not good at something and have someone help you then just pretend like, oh, everything's going great.
Kelly Costello: I have changed the perspective of how I look at business. It's almost like it's a puzzle or a game where, okay, how can I, at the end of the day, you got to make money. So, okay, this is what I have in front of me. This is the market.
Kelly Costello: These are the general rules of the market. This is how retailers make decisions. And this is how consumers make decisions. How could I work within this market and these rules and make the most amount of money with what I have.
Kelly Costello: And when I changed my perspective to think of it that way, not of me trying to force the market to adapt to the way I want to do things. So when I change it
Kelly Costello: to this is how the market is, how can I adapt to make the most money within this market? And I know that's kind of like a really broad statement, but if you apply that statement to your particular
Kelly Costello: industry. Like I was telling you some of the tips that have worked for us, a low barrier of entry for retailers, because understand that they are very busy. They don't make a ton of money,
Kelly Costello: and they need to maximize their time. They need to have a motivation to order from us. So we eliminate those barriers of entry. In order to build a company, you have to have a line. So let's add products that make sense to this line.
Kelly Costello: And so, you know, with the cake mix, ice cream, mix. We've done the cookie mix with some auxiliary things. And we might even branch into to cat products because there's quite a market for that. So I was like, you have to build
Kelly Costello: a company. And I didn't get this business person's mentality until after Shark Tank. And that was mostly because I kind of fire lit under my butt of having the sharks tell me some really good
Filip Valica: advice that you need to add, you need to make a line or Mark Cuban called be a entrepreneur. He's like, why have you been in business for four years and you only have like $28,000 in annual sales to show for it? I'm like,
Kelly Costello: yeah, that is pretty sad. Let's figure out how we can change that.
Kelly Costello: So it's, I just made a lot of mistakes. And I was young. I was 21 when I started the business. And so I'll be celebrating my, I'm 30 years old now. So I launched or I started it right before I turned 22. too.
Kelly Costello: So it just, I didn't know what I was doing. And I didn't ask for help. And now I've learned ask for help, pay attention to other people, and adapt. Don't be pighead and be like, well,
Kelly Costello: we have a great product. So you should just like it. You should just buy it like the way that we want to sell it to you. No, that's how it works. Well, you hear that a lot. And it does work for some people. And I think people will look at, let's say Apple, they can create a market. They have the
Kelly Costello: cloud to do that. They will tell you what you should buy, right?
Kelly Costello: And they will look at that and say, well, I should be able to do that, too. Or that is a business lesson that I should take away is that if the market's not there, build it. Yeah.
Kelly Costello: And I guess it does work for some people, but you can definitely spend a lot of time and energy on that and throw a lot of money away and not get anywhere. You talked about funding briefly. You said you started on the shoestring. Four or five years later, you went on Shark Tank.
Kelly Costello: Have you had any injections of capital other than what you brought yourself? Or have you, has the company basically self-funded all your growth?
Kelly Costello: The company and myself have funded all the growth. I have seen partnerships go very, very sour. And so having witnessed some of them almost firsthand,
Kelly Costello: it's really made me not be interested in having an investor. So I've just been really scrappy and very careful with my money. In 2014, no, I almost went back.
Kelly Costello: bankrupt because of a bad business decision that I made. And that's part of why I didn't really hit my stride until last year. We were doing great in 2013. And then 2014, I, like I said, almost went bankrupt.
Filip Valica: So I got a, I got interest from H.E.B. grocery store, which is, like, largely in Texas.
Filip Valica: They were interested in our products.
Kelly Costello: And I was speaking with my buyer. And we had settled on puppy cake making them a special product, these gift packs that had a bone-shaped oil cake pan and one cake mix. and there was like crinkle paper, they were adorable. And we had like this little dye cut piece of paper in there.
Kelly Costello: It says, had some information about the product.
Kelly Costello: They loved it. Like, we're going to do this. And there's a lot of things you have to do whenever you set up with a large retailer like HGB or Bed Bath and Yon or Target.
Filip Valica: You have to set up in their internal system. And it's a lot of paper, not as their paperwork, a lot of electronic stuff, a lot of going back and forth.
Filip Valica: So before I pulled the trigger on buying 5,000 of these, I think, I think it was 10,000,
Kelly Costello: 10,000 of these cardboard gift packs for my box carton supplier at the time. I asked my buyer, I was like, are you sure? Like, are you ready for them? Like, I really need that PO. Like, we're not going to make your deadline unless I order these boxes today.
Kelly Costello: He's like, don't worry, the PO's coming. There's still a few more steps on the internal system. So I can't give you a PO until we get through these final steps. He's like, but it's coming. It's going to be the total value of that purchase order was like $17,000.
Kelly Costello: And but I had to spend way more than that to make it because I had to pay like 10,000 of these boxes. Yeah, you had minimums to order. So were you able to put anything on the PO that says, you know, what will deliver X days after receipt of PO?
Filip Valica: Or are they so adamant about getting their way where they kind of pound the table and say, hey, we're H-E-B.
Kelly Costello: You have to do business our way. Well, what ended up happening is that the next week,
Kelly Costello: so I placed the order trusting my buyer that he was really going to to commit to this purchase order.
Kelly Costello: And when we finished the order, because we worked furiously to finish this order on time,
Kelly Costello: my buyer just felt face the earth, never submitted the purchase order. So legally, H-E-B, like, they didn't do anything wrong.
Kelly Costello: He would not return
Filip Valica: any of my phone calls, were not returning my emails. And I just got fresh, I mean, it's a frustrating situation as an entrepreneur to be in because you're like, you know, I wish you just would have been honest with me that you weren't real confident. I didn't. I didn't.
Kelly Costello: up talking to his boss later and she said, yeah, he got a little too excited and didn't have everyone's approval before he committed to that. And that's why it didn't actually become
Kelly Costello: a purchase order because the next layer up said, no, we can't do it. So I had like $15,000 worth of inventory just sitting in my loading dock,
Kelly Costello: which meant all the cash, like I borrowed money from my parents. Like I leverage all my credit cards.
Kelly Costello: All of my cash to like pay myself and pay my employees was sitting at my loading job. Tied up an inventory.
Kelly Costello: So we did the best we could to unload it. And that was another mistake I made with that particular order is that our profit margins were razor thin on that. And I got kind of greedy. Like I thought, well, I'll still make money as long as
Kelly Costello: HEP buys this. Like, I'm still going to make money. So at the end of the day, it doesn't really matter if like I'm only making, what was it like 15% or something, it was like very little money.
Filip Valica: And it was more labor intensive than I had anticipated. So I spent the rest of the year just
Kelly Costello: digging out from underneath that hole.
Kelly Costello: And later that year is when I launched the ice cream, the first flavor of ice cream,
Kelly Costello: which helped to dig us out. And then once I launched the rest of the flavors at Global Pet Expo, we, you know, got a, the war for that. I mean, it was just like we coasted after that. The money just came in so much easier. The sales just kept growing and
Kelly Costello: like, you know, we were just expanding here, taking the profits and just expanding our manufacturing because we just couldn't keep up anymore. Were you able to sell some of those
Filip Valica: products that you had earmarked for HV online or did you create a temporary product just to offload some of that inventory? We sold all of it. Like it was a, we were, we were motivated to do that product for HV,
Filip Valica: but it was my intention to continue to sell it outside of that order with HV. So my retailers loved it. So like we were selling them. We didn't have a problem selling them to our regular channels at all. But we didn't have as many stores now as we did then.
Filip Valica: So I mean, they were all buying it, but not at the volume of HEP.
Filip Valica: And that's hard too because you created a custom product for that one customer. So is the takeaway there that make sure you have more than more? one market or more than one buyer for a product that you're creating?
Filip Valica: Well, one of the most important things I learned from it is never fill a purchase order until you have the purchase order. Because a purchase order is a legally binding document. Sure. You enter into with a person who submits it.
Filip Valica: So once I submit it, if they don't pay you, I mean, you have legal recourse to follow off that. I had no legal recourse because they never actually gave me the purchase order. It was just a verbal going back and forth. There was no number involved.
Filip Valica: So I learned that less than a hard way. I will never, I have, will never fill a purchase order unless I have the physical purchase order.
Filip Valica: And the one time I did fill a purchase order, I ended up having to sue one of my customers because they went, I don't know what was going on over there, but they, they wouldn't pay their bill.
Filip Valica: I did get my money in the end, but that was painful too. Yes. Was it a big order? it wasn't even that big of an order like i was like i'm not like it's not killing me here like you know
Filip Valica: the hb one nearly killing me i was like i think i want to go bankrupt because like i just i'm going to make this work but this one purchase order wasn't that big it was less than two thousand dollars so it wasn't
Filip Valica: destroying us to not have that money but you know it's more the the principle of i'm like i don't do these i don't you know make products so that you can essentially steal them from me you know it's Sure. Yeah, sell them for free.
Filip Valica: Yeah, basically, they're stolen goods when you order them and don't pay for them. Wow.
Filip Valica: Thank you again for being so candid and sharing so much of your experience. Do you have parting advice or a parting thought for anyone that might be in your shoes back when you were 21, 22, and you were trying to launch your own product?
Filip Valica: I would advise that anyone who's launching a product to take advantage of the many, many resources available to them. There are small business development centers at almost all major universities.
Filip Valica: or like there's one in every city and they're free you can go talk to a mentor they have great great advice uh they've seen a lot of things a lot of different industries there's hundreds and
Filip Valica: thousands of books that you can borrow from the library for free read on ebay blogs the more you invest in figuring out how am i going to make money off of this like really sit down and
Filip Valica: visualize i have this box of cake mix how do i sell like how do i sell like how do i I get to consumers.
Filip Valica: The more time you spend really visualizing how you're going to make money,
Filip Valica: the faster you will make money.
Filip Valica: And sometimes you might find out, you know, there isn't a market here.
Filip Valica: Like I can only make, so it's like cemeteries. You can only put so many plots in a cemetery. So you might find out that you can't make money off of whatever business you're trying to go into. Very good point.
Filip Valica: So, Kelly, can you talk a little bit about puppy cake and how people can find you? Where can we buy cake mix or ice cream? So puppy cake mix, especially dog treats, our best-selling products are cake mix for dogs and the ice cream mix for dogs.
Filip Valica: We use all-natural heat ingredient ingredients and manufacture everything here in our facility in Evans City, Pennsylvania. So everything you get, you're going to have high-quality ingredients. Your dog is going to love it.
Filip Valica: You can buy our products on Amazon.com, on our website, puppycapeake.com, or find a store near you on puppycake.com. Just put in your zip code and it'll show you thousands of stores. that are across the United States.
Filip Valica: Excellent. Thanks again for coming on the show. Thanks again for sharing your highs and lows with us and sharing your wisdom. I really appreciate you coming on. You've been an awesome guest. Thank you so much. It was a pleasure of mine. I love it. And that's all I've got for today. Thanks for listening.
Filip Valica: I put all the links that we've covered under the show notes posted on the product startup.com slash episode 13.
Filip Valica: If you've brought your own physical product to market or you know someone that has, please let me know. Drop me a note by going. to the product startup.com and clicking on AskPhilip. I'd love to have you on the show.
Filip Valica: If you like this episode and you want to see others like it or you even want to see something completely different, please shoot me a review on iTunes by going to the product startup.com slash review. I really appreciate your support and I'll see you in two weeks.
Filip Valica: Thank you for listening to this episode of the Product Startup podcast with your host, Philip Felizza. For more great content and to stay up to date, visit theproduct startup.com. your guide to getting there.
Filip Valica: Thanks for tuning into this episode of the Product Startup Podcast, the show that teaches you what it really takes to bring your product to market and turn it into a big success. This podcast series is brought to you by Mako Design + Invent,
Filip Valica: the first firm in North America to provide global caliber end-to-end physical consumer product development to startups, inventors, and small product businesses. If you're looking for product development help on your invention, head over to Mako-design.com.
Filip Valica: That's M-A-K-O-design.com for a free consultation from one of Malko Designs for design studios from coast to coast. Thanks for listening and see you next time.
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