This is a unique Business of Software two hander. Peldi Guilizzoni (founder and CEO of Balsamiq) chats to John Nese, owner of Soda Pop Stop. Bootstrapping sustainable, successful businesses is not unique to the software industry, so what can we learn from ‘real world’ businesses that have succeeded.
Bio’s, Video & Transcript below
Giacomo ‘Peldi’ Guilizzoni is the founder and CEO of Balsamiq, makers of Balsamiq Mockups, the instantly-useful, forever-loveable wireframing software. Balsamiq is a tiny, nine-person multi-million dollar multinational, based out of Italy, France, New York and California. A programmer turned entrepreneur, Peldi lives to learn new skills and to share what he learns, be it via his blog, giving public or mentoring other software startups. More at Balsamiq.
John Nese owns and manages Soda Pop Stop. He is devoted to the art of soda pop and supporting the small businesses behind each bubbly drink, Galco’s Soda Pop Stop features more than 500 flavours of soda at its Los Angeles storefront and nationwide through its website at www.sodapopstop.com. With a mission to supprt small soda makeer , Galco’s motto is “Freedom of Choice” which mirrors Nese’s determination that customers have the right to choose from more than just a handful of mass-produced, big-business selections. You can find out more at SodaPopStop or watch this great video – Obsessives.
In this interview, which concluded the second day of Business of Software 2011 and was followed by a soda pop tasting, Peldi draws from the wisdom which Nese has received in his experience and shares it with the entrepreneur community.
Next AMA: Alex Osterwalder, Author, Business Model Generation, 24th Jan 17.00 GMT.
Don't Miss a Thing - Get BoS Updates
Want us to let you know about new talk videos, speaker AMAs, Business of Software Conference updates? Join the smart people who get BoS updates. Unsubscribe anytime. We will never sell your email address.
When I was about 8 or 9 years old we went on a family vacation up to a place called happy camp. They had a spring and this water had natural carbonated water. I can remember thinking as a little kid, thinking about that spring and saying, ‘if we could pipe this down to my school, when we turn on the water spickets we can get soda and I could have different flavors of soda. I wouldn’t have to drink the water that I drink.’ I went to work with my father when I was 5 years old. Galco’s itself goes back to like the roots, is 1897. About 10 -11 years ago a Pepsi cola salesman came in and he said, “I got the best buyer you’re ever going to get on a pallet of Pepsi cola cans. I’m only going to charge you $5.59 a case.” I said, “thank you but no thank you. I am going to send my customers down the street to Ralf’s because they are going to be on sale down there at a $1.99 a 12 pack.” And he says, “Well you can’t do that. Pepsi Cola is a demand item and your customers are going to demand that you carry Pepsi cola.” And I said, “my customers are going to be happy that I was honest with them and sent them down the street. They can buy them cheaper than I can buy them.” And after 2 weeks of really being upset I said, “thank you very much Pepsi cola for reminding me that I own my shelf space and I can do anything that I want.” So I immediately went out and found 25 little brands of soda. I thought, “Gee whizz”, they were still in glass bottles and I put them on the shelf and people would come in and look at them and say, “what are you doing with all those old things that don’t sell?” and when I got to 250 is where you find, you know … So now we have about 500 different sodas.
If you are going to get a root beer, the one that is hardest to find is a Red Ribbon because it’s made with the (?). If you are looking a lemon lime, try the Bubble Up, it’s still made with lemon and lime oils. The Manhattan Special, the company that makes the coffee soda, they’ve been making coffee sodas since 1895, the same family, in Brooklyn, they roast the coffee beans they brew it they bottle it. A little 10year old kid he comes running in he says, “where’s that cucumber soda you made me buy?” and I am laughing. I thought it was funny; a little kid asking for a cucumber soda. You know they don’t drink vegetables. People are saying, ”well you’re here and you’re working all the time”, and I’m say, “I don’t work, I just play all day long. I come in and play.” It’s flavored water with a lot of bubbles. If I were going to define it with one word I would say, ‘happy’, or ‘smile’. By the way you should taste it, what do you guys want?
People come in here and look around and they say, “Well this is overwhelming. I didn’t know there was this many flavors of soda.” What really has happened is, it’s given exposure to the little bottles that they’ve never had before. We just picked up another independent bottler. They’ve been bottling since 1926, the mother, the daughter and two brother ; bottle. Those floral sodas; the fellow called me “you gotta carry my sodas. I’m from Romania. We still know how to press the rose petals.” And he says, “I’m going to send you samples.” And I said “Oh, OK.” And I am thinking, ‘perfume? Wow! Crisp clean rose soda. The American republic has never been exposed to anything like that ever before.’ We bought the total run. They are not available anywhere else in the United States and so I said, “really, what else do you make?” “Well I have a cucumber, but the problem is nobody will give me a chance.” So we commissioned a run of the cucumber. First lady comes in, “oh, this isn’t what I was expecting at all. This is actually very good.” When the American public has a choice, they are going to buy it, they are going to try it.
The way a product goes in a glass bottle is the way it comes out. Everything is over carbonated in plastic because it starts breathing, and it has a four month shelf life so they get flat as they go along. But when you put something in a glass bottle, I will tell you the caps are so technologically advanced that the way it goes in is the way it comes out, 3, 4, 5 years down the road. Have you ever picked up an old glass bottle?
Spk1: oh wow heavy. That will hold carbonation. The bottles today are very thin glass, and if they have a weak spot in them they will explode if you put too much carbonation in them. You can drop these and they will actually bounce, they won’t break. I mean I drop them and they just pooom! They won’t break. Talk about re-usable?
Most diet sodas are really pretty bad; I mean they just don’t taste good. There’s been a few that have come out. Stewart’s black cherry diet is probably the finest diet black cherry I have ever tasted. There is Jones –has diet green apple that’s very good. And then there is Sprecher – has a low calorie root beer which has like 11 calories in it. It’s not a true diet, but it’s slow enough if you are watching calories. But other than those 3 or 4 or 5 most diet sodas … Drink less, how’s that? Drink 6 ounces rather than 12. And you get 60 calories versus 120 calories and then you are satisfied and you’re happy.
Everything prepared in this country has corn syrup in it. And it’s totally unnecessary. The largest single crop in the world is cane sugar. It’s larger than corn and wheat put together. It takes three times less sugar to sweeten with than it does corn syrup. I mean take a look around at the diabetes; you will never get an allergy from sugar. You’re going to get an allergy because there’s a spore in corn syrup that cannot be refined out. And people have allergies to corn products. So why would you use corn as a sweetener? We have some, yes, the Stewarts, the IBCs, and the Crush. They are contract bottled and they are done in glass but they are done with corn syrup for the supermarkets primarily. We carry them because they don’t come in any other way. Once a year Coca cola makes a Kosher coke just before Passover. The Kosher one will be cane sugared, it’ll have a yellow cap, it’ll have a ‘U’ on the upper left hand corner with a circle around it and the label will still say, ‘corn syrup’, it won’t be changed. Try the two side by side and then tell me. The one with the cane sugar just goes pop! And it explodes and the flavor just goes wham!! It’s delicious and the one with the corn syrup is like prrpth!!
What I would to see is a root beer cola. There was actually a company about 100 years ago called root beer cola, and it was a cross between a root beer and cola. And I’m just fascinated with that. Or I would like to see a pineapple cream. I just think it would just be delicious. I’ve been trying to get somebody to make it so we we’ll see.
OH!! Energy drinks, they taste bad. They are small cans, small sizes, big prices. I mean Red Bull sells in the billions. I mean Coca Cola wish they could get that kind of a profit out of a 8 or a 12 ounce can, and for what?
Big business loves big government. They just take the market place up, eliminate all the little guys, they run them out of business and then they jack the prices up and then they control the market. But you look at the candy section its Nestle, Hershey’s and Mars, or you look at the soda pop market its Coke and Pepsi. My thought had always been that what I wanted to do, was do business with other businesses my size, to help them become unique businesses and that’s exactly what’s happening. And what’s really interesting about it is, out of all the things we sell wholesale, one business a mile away from the other and what they are selling is totally different. One restaurant we sell to, they love the floral sodas and another place they can’t give them away but they are doing the Red Ribbons and I’m going, “isn’t this interesting that everybody has found their own level and their own niche, and they’ve done it on their own.” The important thing is to set yourself apart and provide your customer with something that nobody else has.
The most common thing I hear from the American public is, what’s the best? In Coca Cola and Pepsi, what they’d like you to believe is what they make is the best. Everybody’s taste is different. I can tell you what I like or I can make suggestions, I mean the New York Times called the best cola ever made Fentimans, curiosity cola. It’s brewed like a beer, it has natural carbonation and it has ginger in it. There’s so many people came in here still looking for RC Draft, which was a very soft cola a very smooth. So I point them out and say well maybe you want to try a Rock & Rye which is cream finish cola from Detroit, a very old brand. So try all these and then tell me what the best is for you.
Who do you think passed CRV laws? You’re going to get me on my soap box again and then you’re going to have to point the camera up.
It wasn’t written for the consumer and it certainly wasn’t written to keep this country green, it was written so coke and Pepsi wouldn’t have to wash a bottle and they wouldn’t have to make recyclable bottles and they could transfer the cost to the consumer. I called the recycling center when I got started and I said, “listen I want to put a recycling center in. They bring them back to me and I’ll give them the money and I’ll sell them some more sodas.” “Oh am sorry you can’t do that, because you have a recycling center two blocks away.” I said “yeah but they don’t give the full price, and I want to give the full price to the customer to get them back to sell them some more.” And he says, “if you did anything like that you’d be in restraint of trade and you could probably get sued by the state.” If we were really caring about the environment we would have reuse, not recycling.
Oh I’ll drink one or two a day. But I’ll actually have diets or water or something. I like carbonated water, I started drinking carbonated water about 20 years ago, I just like the bubbles. If you get a bottle of Gerilschteiner and it has the great big bubbles. And then there was another one from Germany called the Polynarios with the little bubbles. I just tasted one today, a Vishey water but it came from Spain, from Catalonia and I tasted it and that had the finest bubbles I’d ever tasted. I mean it was really fine mineral water.
What would you like? If you’ve been looking for double cola and can’t find it, we have it. Before 1900 it was called the Lota Cola now it’s called Double Cola and when you taste it you’ll know why they call it double cola. Below it is the Red ribbon, by far the cherriest of all the cherry soda. And when you taste it’s like oh my goodness! Hotlips, this is actually a pizza kitchen up in Oregon. They are made from 100% organic fruit. And if turn them upside down you’ll actually see the fruit coming down the neck of the bottle. We also have from Central America, Banana Nina. This one actually tastes like a Charlie rancher banana. It’s the only banana soda I’ve ever tasted to date. This is very interesting. This is made from the bark of the Mabi tree and it is actually brewed like a beer and it wasn’t up until two years ago that this was available commercially. Up until that time if you went to the Caribbean it was made home brewed and that was the only way you could get it. This is Moxie, the original elixir. This has been around since 1884. By the way it’s the only soda to ever make it to the dictionary. And it came in a six and a half ounce bottle and if you could drink two of them you had a lot of Moxie. And we have the Manhattan Specials. They are all natural, they are natural bottling, if you look at the bottom you’ll see the fuzz and that’s because they use real vanilla beans, if you look at the orange you’ll see the pulp of the fruit in their orange. So whatever you are interested in we have it, and if we don’t, we are looking.
Peldi: Ladies and gentlemen, John Nese. [Applause]
John Nese: That’s the first time I’ve seen these.
Peldi: Is it really the first time you’ve ever seen it. Coz I watch every other week. [Laughter] I want to be just like you when I grow up. So before we start I have a little present that…don’t tell anyone but I smuggled it in the country. You’re not supposed to bring liquid. I brought you some Italian sodas. Wow!! Am nervous. Oh my goodness
Peldi: I thought we could have one or two while we have this intimate chat. [Laughter] Ok. And also my favorite kind of Italian soda… its balsamic vinegar. [Laughter]
John Nese: Thank you. I like balsamic vinegar.
Peldi: Thank you for the cucumber soda that you sent me and it’s actually really delicious. I’m going to open it up right now. So I also want to thank Mark for giving me a chance to meet one of my heroes in front of everybody. This video really speaks to me and I thought it would also speak to this crowd. Coz I see a lot of parallels between what you’ve been doing and the way this part of the IT industry sees themselves. We want to build sustainable businesses. We are not the Facebook or the Twitter or the Google, that’s like a whole different, we read the same news, we both write code but it’s completely separate. I think that this crowd can learn a lot from you and so I wanted to just ask you a few questions.
John Nese: Of course
Peldi: All right. So first how did you get started? How has your business grown? Why sodas? Well, I can tell why.
John Nese: Basically what happened is we were going broke, we were an Italian grocery store and the neighborhood changed and the Italians who were in the neighborhood did one of two things. Either they moved out or they stopped cooking. The second thing that happened, the supermarkets bought the distribution channels for the little markets and the first thing that they did was close them down. By closing them down, they eliminated the cap on supermarket pricing, up until that time little independent businesses were the cap on supermarket pricing. So by eliminating the cap they can charge whatever they want. And by the way the prices in this country reflect that.
Peldi: so what year was that?
John Nese: That was somewhere right around the nineties. Eighty five, ninety.
Peldi: So your business, everybody went to the cheaper supermarket?
John Nese: Well yes, they could buy it cheaper. Of course they were paying more but still they could buy it cheaper.
Peldi: and you had this business, how old was it at the time? You have been around for a while.
John Nese: Well its very interesting. It was right around 95 that we started thinking about, I started thinking if we could go another year another two years it may get to 1997 we would have been in business a 100 years and no one could be ashamed of that. You know, you just got to make that little bit more.
Peldi: 2 more years.
John Nese: And so we worked to that goal and we made it and we were still there. And then we looked around and go, “you know if we can make it to the year 2000 or 2001 we would have been in existence not just 100 years but in two millenniums.” How many businesses can claim that? So we worked and we kept working. And it’s really interesting how things happened. They just started happening.
Peldi: so was it a conscious decision. The business is drying up quickly we have to do something urgently and boom I have an idea let’s just become the soda business and boom it just happened?
John Nese: No what happened is Pepsi cola came in and they were really arrogant about it. A salesman came and said, “am going to sell you this Pepsi and am only going to charge you 5.59 a case.” And I looked at him and said, “Well, tell me on that 100 case pallet how much profit am I going to make?” “Oh you going to make 30 dollars.” And I said “thank you but no thank you. I’m sending my customers to the supermarket down the street because they are selling it at $1.99 a twelve pack and it doesn’t make any sense” “well you can’t do that because Pepsi cola is a demand item and your customers are going to demand that you carry Pepsi cola.” And I said, “my customers are going to be happy that I was honest with them and I send them down there. They can buy them cheaper and I can buy them cheaper.” They don’t owe me anything.
Peldi: and that’s when you decided to start buying some other sodas for that same shelf? So they helped you?
John Nese: Well they did. It took about two weeks. I was so angry. Nobody could talk to me, I was upset, I went through the whole thing. And after two weeks the light bulb went on. The light bulb said “you know you should thank Pepsi cola for reminding you that you own your shelf space and they don’t and you can sell anything you want.” And it was at that moment that this big relief, it was like, ‘ok I can do this.’ I immediately went out and found 25 little brands of soda, they were still in glass bottles, they were still made with canned sugar, a lot of them were made with real ingredients and I put them up on the shelf and all the people coming in look and they would go, “what are you doing with all those old brands that don’t sell?” And I didn’t say a word, I just kept adding and kept adding and when I got to 250 is where you find it. And then my daughter came along, and my daughter is very bright, and she said to me “dad what you are doing here is really great. But if the people don’t know about it, it’s not going to do any good. I am going to send a letter to … what is it…Western Magazine or something like that,” I forgot the name of the magazine. And I said “oh OK.” And as she was walking by she said, “by the way dad I’m sending one to Huel Howser.” Now Huel Howser is a fellow that concentrates on little business and little things that most people in California don’t know about, and he highlights them. And so, that was on a Thursday, on a Monday we got a call from Huels office he says, ‘if what you say is true, we want to do a show on you.’ They were out the next day, “we want to do a show.” They filmed in 2 weeks and 2 weeks from then it was being broadcast. And it was just happening immediately. And then at the same time there was a fellow by the name… a lady came in and we were on the art and Oddity tour in Highland Park. All of the artists were displaying their wares and we were the oddity. So people would come in and get a little sample of soda and that was really interesting. And then this lady came and she says,“you belong in the times” and I said, “oh yeah I know that.” And a couple of weeks later she comes in with her friend Charles Perry and we just talk like we are doing now, he never took a note, never said a word and walked out. I said, “I guess he doesn’t like it.” And a couple of weeks, three weeks later I get a call from The Times and they said they wanted to do a photo shoot. They came in and then they did a photo shoot. Charles Perry copyrighted… or syndicated that column and it ran for 9 months all over the world. I didn’t know what he was doing but I know our business went up, Hugh Houser aired and oh my goodness we were jammed. That was interesting because this man walks up and he has a copy of a newspaper in black and white, the photo was in black and white in his pocket, and I looked at it and said, “oh I haven’t seen a black and white,” most of them are in color. And he says “I was sitting in the Tokyo airport and I knew I was coming to Los Angeles and I thought I’d stop.” And it goes like whoop!
Peldi: Wow nice pivot. [Laughs] And your daughter is in marketing?
John Nese: No, she’s a chiropractor [laughs] but she’s smart. You don’t have to be in marketing. She’s in tune. She came to work when she was about 12-13 years old.
Peldi: Nice. Speaking of doing your job, how did you learn? You said in the video you started when you were 5, how did you learn to become the business owner and how long did it take you get really good at it?
John Nese: Oh all my life. It’s not something that happens overnight, you have to work at it. And I started when I was very young. Of course I had good models, my father…
Peldi: he owned the store before you?
John Nese: Yes and he became a partner with the fellow that founded it back in 1897.
Peldi: I see.
John Nese: And it was really something. My father would say you know you got to go broke three times before you can make it. I don’t know whether he literally meant going broke but I think what he meant is that you had to go down three times you had to fail, and I think that’s been the whole thing in this seminar, don’t be afraid to fail because you’re going to gain and you are going to do better.
Peldi: thank you, I’ll remember that. So since you mentioned your father, I had this slide up last year when I made my speech about my heroes and you know of them and in the room and it’s kind of embarrassing, but do you have people that you look up to still to this day or they sort of inspire you. Who do you want to be when you grow up?
John Nese: Well, I read a lot. And the person I got the most knowledge out of was Cincinnatus.
Peldi: who’s that?
John Nese: Ancient history, romans, he was ploughing the fields and they needed him to help defend rome. So they pulled him out of retirement he led the army and when he finished he put his sword down and went back to his plot.
Peldi: so what about him?
John Nese: I think he set a precedent. You do what you need to do and you go on and you have to do what you need to do. I mean that was really important to me and I read that a long time ago.
Peldi: everybody is taking notes. [Laughs] damn I should have majored in history instead of engineering.
John Nese: Well, I wanted to teach ancient history. That’s what I wanted to do. And then i got into college and then I found out you had to be fluent in two out of three ancient languages to do your dissertation. And it was Latin, ancient Greek and ancient Hebrew. Most people don’t know what ancient Greek sounds like so I got [??] and decided that was it. I have to do something else.
Peldi: so you said it is about doing the work and the job to be done. So how much do you work? Can you describe a typical day?
John Nese: I never work; I’ve said that very early on. I just go in and play. When I was six years old I went to work with my father and it was very interesting. He said, “ok you dust all the lower shelves.” I go in there and am dusting all the lower shelves and I got to the Twinkie rack. And what really intrigued me were the jelly rolls at the bottom of the shelf. I wanted to know how that jelly was rolled inside there. I could go into the cooler and there was a wheel of Swiss cheese and I wanted to know where those holes went. And so that was all very intriguing to me. And so when I grew up and I graduated from college and my father he calls in and he says, “ok I guess you’re going to work for a big company now.” And I said, “no I want to work here.” And he looked at me and he just shook his head and he says, “I want to tell you something” he says “all you going to do is make a living here, and you’re a damn fool. Go for the money.” And I said Pop they’re going to stick me in a cubicle somewhere and am going to be there for the rest of my life until I’m ready to retire. And I’m not going to be happy. I’d rather be here, I can hear the motor run, I can see if the light bulb has to be changed whatever that has to be done I can do it and I have something different to do every day”, so you are challenged every single day. And I think that is really important for people.
Peldi: excellent. [Applause] I knew they were going to like you. So let’s see, you’ve been very successful lately… Well am just doing what I always do.
John Nese:: well there are people around, are people approaching you wanting to invest or acquire you, pressure you to grow? Yes and that becomes a very big problem. My thought was I really wanted to develop a buying co-op. and everybody would put their money in and we’d all divide the money up and the first thing that happened is the bin counters got involved. And the bin counters said, “you can’t do that because you’re not going to wind up with the business.” And I said, “what!!?” And then I remembered what happened to us in the grocery business when the chain stores bought the distribution channels and they closed them down. And that was a real problem because here was the big guy controlling the market place again and eliminating competition. And I said, “yeah that’s true, that could happen.” So.. But at the same time I am not interested in a pyramid. I mean I’ve seen too many franchises that are nothing more than pyramids where the only ones who make it on are the ones on the top, and that’s exactly what’s happening in our area right now. People are going in and setting up soda pop stores and charging $50000 for franchising and another $50000 upfront. You got a $100000 invested and then they come along and say, “you have to buy everything from me.” And I’m saying, “Who in their right mind wants to do that?” Do you really want to guarantee someone their income for life?
Peldi: wait, so people so what you did and know you have knock offs Yeah?
John Nese:: oh well interesting. Has that been good or bad for business? It doesn’t matter. When I go in and I take a look at the stores that are there and am looking around and am going everything is private label in here, not everything but most of everything is private label and there is nothing really authentic and it’s not really helping who it’s supposed to be helping. For me that’s a problem, for them they are making a lot of money so there’s no problem.
Peldi: they are making a quick buck but probably not… excellent. So how is your company structure right now? How many people do you have?
John Nese: Well we have about eight or nine people.
Peldi: oh! Me too.
John Nese: Yeah [Laughs] it’s a nice size you know everyone and my help is definitely getting better. Oh my goodness it’s really good.
Peldi: wait, lets dig in a little bit. What do you mean? So your help was not so good at the beginning?
John Nese: Well you know I have had employees, I shouldn’t say I’ve had employees because we all just work together but they are dedicated people. I’ve had one lady when we were going broke she didn’t take any money for three years.
Peldi: three years? Wow!
John Nese: I mean three years which she never said anything to me because she could sign the checks. I mean she knew what she was… I mean she is so fantastic. And then the other lady has been there for 20 years, so we’ve had a very long term…
Peldi: so there are ups and downs, there are fights, it is like a family.
John Nese: Yeah and then younger people, what I see here today especially in the United States is young people have a hard time working. I mean…
John Nese: Is that what they… I don’t know [laughs] but all I know is they have a difficult time. Many of them want to start at the top and but with me, I’m sorry but that’s not going to happen. If I’m at the floor and am cleaning the shelves they better be there with me to know how it’s done. Then they have appreciation for the people who stock the shelves, mop the floors and do all of it. And that’s vital, absolutely vital to get a company to work together.
Peldi: imagine you were hiring and you want me to work for you for some reason. What would you tell me, how would you…
John Nese: I probably couldn’t afford you. [Laughs]
Peldi: But let’s say somebody is about to start. Well let me just give you an example. There is a young lady that we just hired and I had gone to the business where she was priorly working and I told her, “don’t lose her, she is really good” and I just felt it. She was on the ball, she had my orders ready, everything was ready and she never winced or anything. When she said she was going to do something, she did it. And I said, “don’t lose her”. Well they lost her and I hired her.
John Nese:: but how did you steal her away, what did you offer her?
John Nese: I didn’t steal her away I just said to her I like the way you work. I would like very much for you to come and work for me. [Laughs]
Peldi: it’s that easy.
John Nese: I will be honest and that’s the truth but I watched her and I told her that and it’s really important and so far, and she has a lot more to learn because we are still training her, but everything she does she is meticulous about it and she knows what she is doing.
Peldi: so do you plan on ever retiring?
John Nese: No. I tend to joke about it. I say go on as far as you can.
Peldi: what happens then? Well I have grandchildren. My grandchildren, they come and they play on the pallets that you saw on the video and they climb and they think they are king of the mountain or whatever and one of them comes over to me and says, “Papa john, you’re the boss right?” “Yeah I’m the boss” and he says “does that make me a boss too?” [Laughs]
Peldi: so he is the one, nice.
John Nese: And every time I see him he runs… they are twins by way, he runs and puts on his soda pop stop trainee shirt when I go visiting.
Peldi: nice. So it seemed like from the video you were still very much hands on, you’re the CEO right.
John Nese: Well that doesn’t mean anything, that’s just three letters.
Peldi: I know, I know [Applause] but I am totally jealous coz it seems like you’re still able to do what you love every day. I do. So how do you do that even if you have nine people to manage and check in and this is problem I’m facing right now, this is what I really wanted to ask you. [Laughs]
John Nese: Well, I think you have to work in to that solution and every solution is different.
Peldi: ok that doesn’t help me so much No, [Laughs]
John Nese: No, maybe one day, yes of course. Ok, well alright. Ok I’ll digest that. OK, so what type of metrics do you look at?
John Nese: What type of what? [Laughs]
Peldi: that’s enough thank you. Thank you so much for that.
John Nese: Well you know when you ask me about retiring, I talk to the Doctor, I’ve known him for probably 40 years. He used to take care of my parents, and he just says work as long as you can.
Peldi: Steve Jobs worked until the last day.
John Nese: Right that’s true and my parents did too. Both of them.
Peldi: that’s great. So do you have any company policies, salary, vacation, bonus?
John Nese: The employees that have been there a long time, yes we do. The newer ones, you know the laws have been changed, especially in California and the politicians want to tell everybody about how many jobs they’ve created, what they should be telling everybody is how many part time jobs they’ve created. Not how many jobs. And I think the politicians have it wrong. We should be creating wealth. I am not interested in jobs, I am interested in creating wealth so we can get other people to work again. [Applause] And we need to create wealth. Not just here but everywhere. I mean if we just spread the things out and then everybody makes less and oh yeah, we put in 80000 new jobs this year, yeah but they are all part time so what good is it?
Peldi: so you’ve helped create some wealth by giving a chance to these small bottlers all over the world it seems.
John Nese: Well, I don’t know about all over the world but here. We made a point, it was really interesting very earlier on that the small bottles, oh we just can’t compete, Coke and Pepsi owns the shelf space and we can’t compete price wise. And I just said, “Paul, remember you have to make a profit. If you don’t make a profit I can’t buy your products and my customers can’t enjoy your products. And it is really important that you make a profit. Don’t worry about the other little bottler next to you because they are going to help sell your products and you’re going to help sell their products. The only one you have to worry about is coke and Pepsi because they are interested in putting you out of business.” And that’s what they are.
Peldi: I just an idea for a brilliant business plan. So the small bottler gives away all their sodas but they put little ads in the bottle. [Laughs] what do you think about that?
John Nese: Ah! Well that could work.
Peldi: no eyeballs, throats. Let’s talk about the doing the business with businesses your size. I really love that. We are web, sort of internet company, and it’s like an ecosystem. We pay for all these services online and I notice that I’m always happier if I know that the company that I’m buying the service from is roughly our size, coz we sort of see eye to eye in things. If there’s a problem I know I can somehow get in touch with the CEO.
John Nese: Yeah, you can call him and talk to him and he can talk back to you. A couple of years ago, it was really interesting, I’d been doing business with these people and the family for ever and ever, and we are Soda Pop Stop ok? Because there were stops before there were shops. But this candy company filed on the word Soda Pop Shop and I went to my attorney and I told him, “you told me you couldn’t do that.” “Oh well I guess they did.” So he got involved in it and pretty soon he’s running up this bill, the bill was getting bigger every week and I said, “look at it. They are much larger than we are, they are going to kill me; they are going to drain me. I can’t do this.” And he says, “well you can call the head guy yourself if you like.” And these people that I’ve known, they were in the wine and beer business, I buy a lot of beer from them, well they knew that fellow. As a matter of fact, their father had sold one of his brands to them when he exited the candy business. So he called them and told them the two of us should talk. So I got on the phone, and I called and we talked; we worked it out in about 3 minutes. [Laughs] And I’m going, what do I need an attorney for? My thing was I don’t have a problem with you using the term Soda Pop Shop versus Soda Pop Stop, but if somebody hits on your website and he’s looking for Soda Pop I would appreciate if you would refer them to me. And at the same time as long as you protect Soda Pop Shop and there is no confusion I don’t have a problem. And it works.
Peldi: I read somewhere that you are giving back to the local community; can you tell me a little bit about that?
John Nese: We’ve been there a long time. We’ve been at this location since 1955 and there is a museum in Los Angeles which was the first museum in the city of Los Angeles, the first museum in the county. And it’s the museum which the American Indians, it’s called, it’s called south west museum. Well there is another museum who are absolute money grabbers, are stealing the collection, and I understand the same thing happened in Philadelphia about a year ago or something like that. And what they promised is that they were going to keep the South West museum, which is on the national historic register open as a separate museum.
Peldi: but empty.
John Nese: Yeah they closed it. They picked the collection up, put it in storage and they are telling everybody, we are preserving the collection. They told everybody they were going to keep it open as a separate museum and they didn’t. They didn’t have a problem telling everybody that they had a 10 million dollar endowment. Their endowment when they merged was a million and a half dollars. They didn’t have a problem taking the five and a half million dollars endowment that the South West museum had, no problem at all. And the politicians in Los Angeles, they are chasing the dollars, and they are not taking care of business. That museum deserves to be there. That museum is sitting on a site that used to be a crossover for the American Indians to the next world. Not only is it their crossover, but they have human remains in there that go back a hundred years and they are just white washing over this whole subject. And that museum should never ever be moved.
Peldi: so what are you guys doing to help? Well we had a fundraiser to raise funds. And I have to say it was very successful especially in light of the fact that the Los Angeles times will not print an article on what’s going on in the museum. We had about 800 people show up for a soda taste and this was the benefit of the friends of the South West museum who are taking a point on trying to keep the museum there, and trying to keep the museum open. And I was very happy to do that and by the way Peldi, I never wanted to do a soda sampling. I mean, people should do their own soda sampling; it’s the fastest way to open up lines of communication between people. But this was for a very worthy cause and I very happy about that. I feel good about it and we are going to another one for them.
Peldi: Excellent. Well, we are going to be having a soda sampling as you walk out. Yeah, only coke and Pepsi. [Laughs] So when you heard about pricing, how much freedom do you have to price things coz you have a supply chain right?
John Nese: Yeah, we have pricing; we have to make a profit.
Peldi: Do you have some tricks, like you put the expensive stuff at the top?
John Nese: Nope, I put everything up there but I can tell you what I put on the bottom shelf; all the corn syrup. [Laughs] I mean we have to carry some of those things but they are on the lower shelf. I tell people, “you can get those anywhere; you don’t want us to waste your money here. You want to try these little bottles.” And for example today we going to have a sampling afterwards and these comes from the second oldest bottler. It’s the Red Ribbon line; they are the second oldest and family owned and operated bottling company in the United States. I say second because everybody will fight over the first. Their products are completely unique, and when you taste them you’ll know. They are the last operational pinpoint carbonator. Pinpoint carbonation is made with dry ice; it’s not made on a mechanical carbonator the way everybody makes sodas today.
Peldi: Nice. Actually, do have any thoughts on the in house soda bubbler, soda stream? [Laughs] We just got one and we are pretty happy.
John Nese: I mean, when you drink mineral water, does all of it taste the same?
Peldi: Yes to me. [Laughs]
John Nese: Every water has its own flavor and there are bottling companies that are sitting on springs. And every water will have a different flavor. Not only do the waters have a different flavor but every manufacturer has a different hand on how they do things. And with those bubblers yes, if you’re just buying, you can buy a syrup and just put it in but you just don’t have that individuality. I mean you going to buy terroni(sp) syrups and there’s another one from France, or there’s another one from New Orleans – I don’t know where they are from, but anyway if you’re buying syrups and you are happy with them it’s ok. But you are not going to get that individuality of taste. I mean I’ve tasted a ginger ale that came out of a little bottler in Great Next Virginia it was called Carvers. And it was a golden ginger ale. That was probably the best ginger ale I have ever tasted. Well a few years later the company I don’t when it was, it was sold to a football player from the NFL and the first thing he did was close the place down, rush over to a contract bottler and have his ginger ale made there. And you know what? It’s not the same; you can taste the difference in it. So bubblelers are like contract bottlers, you’re going to get what you get.
Peldi: So must have a lot of people come through your store. Do you have any idea how many customers, repeat customers?
John Nese: No.
Peldi: what about some memorable customers? Did you ever become friends with some of your customers?
John Nese: Well yes, one couple in particular. They came from Michigan, and she was telling me, we were talking about things and she ran a little Italian grocery store and it’s been converted to a gourmet store now. And she was saying, “when my parents got ready to retire my husband and I talked about it and decided to take it over.” He was an engineer. And I said “why was your husband who was an engineer want to leave and take over a little family grocery store?” And she said, “for the quality of life. That it was important for her family and everybody knew where they were all the time, and any time her kids wanted to see her they knew where to go. Just go to the store they are there.” That really struck a chord with me.
Peldi: I could stay here all night. I wanted to open it up for questions to anyone.
Audience: Groupon, do you know what Groupon is?
John Nese: No I don’t like Groupon. Because you have to pay them a percentage of what you earn. What we are going to do is we are going to go to the nonprofits in the area and when we do soda tastings, when we get by this thing with the South West museum we are going to go to soda tastings and we are going to do them for the benefits of things in the area. It was very interesting there was a library and they asked me for a donation and I told them what was going on with the South West museum and everything and she said, “would it be ok if I bought some products.” And it really struck me because she wasn’t asking for a donation, she wanted to do it. And they will be the first ones; we give them the total proceeds. Not a percentage or anything else. This is going to that library.
Peldi: So you pick where you give the discounts and why.
John Nese: And I think it’s important for businesses to be involved in their community because the politicians are going to get the money but who’s going to wind up with it. I mean politicians will sell out in a minute. They are going to sell out your community too. And they have by the way. [Laughs]
Peldi: Our community is the internet is so for now it’s a little more protected I guess, or harder to control. But we’ll see. So anyone else?
Audience: hello, I would just like to ask do you use Foursquare for promotion.
Peldi: do you know what foursquare is? Have you heard of foursquare?
John Nese: No.
Peldi: it’s where people check in… No.
John Nese: yeah. The answer is no [Laughs] You’re talking to the wrong person. I am not computer literate. I was born way before.
Peldi: actually this might be a good time, what’s your website address?
John Nese: It’s sodapopstop.com or if you go to galcos.com they’ll both point to the same site. And in all fairness that site was done 15 years ago.
Peldi: so go open it up on your phones if you ask, there’s a nice animated gif but it works right. How much business do you from the website. Yes, And as Mark and I were talking and I said am really happy about my site nobody has been able to hack into it. And Mark says “oh that’s because it was built before the hackers were born” [Laughs]
Peldi: So I don’t know if Toby from Shopify is here. He helps businesses… we have people here who help businesses like yours with their online presence. Who would like to volunteer to help them with their website, come by later coz we could use the help. His assistant told me to say this. [Laughs] alright anything else, any other?
Audience: so what percentage of your business is mail order versus…?
John Nese: Most of our business is walk in but we do have a very substantial mail order business. The problem with mail order especially with sodas and I have to tell you a little story. That was my daughter’s idea. And when we first got started I got a call from Tennessee and this man says, “I’d like to buy some of your great bet” and I said, “oh am sorry but we don’t ship.” My feeling was it was too expensive to ship. It cost more than the product. And the man he said, “well I’m taking a road trip about the grand canyon I think I’ll kind of swing buy and pick up some great bet” [Laughs] and my daughter is listening in and she says “now dad do you want to tell people how to spend their money?” and at that point I said “ok you take care of it” [Laughs]
Peldi: I think your daughter should be in marketing.
John Nese: She is very good at it by the way.
Audience: First I wanted to say thank you for sharing your story. It is very inspirational that you basically told the big guy to go to hell; I will do business the way I feel that is best to my customer.
John Nese: Well yeah you have to. Because if you don’t they are going to own you. Now, there’s something else too. [Laughs] When they come in and they sell to you they are not giving you the same price that they are giving to the big guy. ‘Oh they buy more’ well where do you think your profits go? Your profits go to help buy shelf space in the big stores, so you are paying for that shelf space and they are helping to put other little businesses out of business. And so do you really want to do that. And the answer came back to me and no I don’t want anything to do with them.
Audience: so my question, which actually is a follow-up, when you were actually thinking about this, what sort of fears did you actually have to overcome to just go in the direction you actually went.
John Nese: That I actually what?
Audience: You decided to expand your soda offering and directly compete against them in a slightly different market, what sort of things were going through your head when you were making those decisions?
John Nese: Well it’s really easy to make decisions when you are going broke. [Laughs, Applause] and quite frankly we were going broke, we were in a controlled collapse and that’s when I thought about making it to 97, making it to 2000, 2001. Oh, first I wanted to make it to 2000 then I realized that the millennium didn’t start till 2001 [Laughs] and we made it, and then after that it was just boom, it hit. And you never know. If you quit, you defeat yourself. Nobody can defeat you but yourself.
Peldi: there’s lots of tweeting material in here. Anyone else?
Audience: In the video you talked about different things, different products that you want to see and you’re like I can’t find this particular type of root beers and like that. Have you ever thought about getting in to actually making your own soda?
John Nese: Making our own soda?
Audience: yeah, you seemed very knowledgeable It’s really interesting that you brought that up because we are In the highland park of Los Angeles. Highland Park area was the first area outside the [??] boundaries of Los Angeles that was annexed to the city of Los Angeles. And we had a number of very small bottlers. One of them, which was White Rose which was sitting on the white rose springs. Now they bottled up to the late 60s and early 70s. And so we wanted to do something that would be a continuous add on to the South West museum and so we brought it back. And this is the truth, the members of the community, computer people, graphic designers, actually found the old label and redrew it by hand and we came out with White Rose sodas. So on our side is the White Rose. You won’t see the label because we got work to do, but we did white rose.
Peldi: are the original business owners…?
John Nese: No, they are gone. We had to find a bottler who used the same type of equipment. And there were people around whom as little children who would walk out of their way after school to walk by the bottling plant and the people there would give them a short filled bottle of soda. And they told me, “you are really close.” It’s not exact, but that’s the best we could do. So that’s the one. And then a portion of the proceeds will go towards the reopening of the South Western museum.
Peldi: did you bring some today? Can we try?
John Nese: No, I didn’t bring any.
Peldi: I’ll have to order it.
Audience: I’m into this kind of trend that people are into these days, like really nice cocktails. Something that started a revival around 12 years ago and do you feel like this is going to go through a similar thing, where you are helping bring sodas back in style I guess?
John Nese: That’s true. We are. As a matter of fact it was really interesting, Fortune magazine did a page on us a couple of years back, and I got a call from Pepsi cola. The head attorney from Chicago, and he is telling me that if we sell Pepsi cola coming from Mexico then he was going to sue me. And I said, “you got to be kidding me. I didn’t know I was such a pain in the ass to Pepsi cola.” And he says, “well you are not, but you understand, we are just trying to protect our investors.” I said,” ok, send me a letter.” So now I have the letter in a frame and its hanging on the wall. [Applause] And I don’t sell Pepsi cola.
Audience: John we really appreciate what you’ve done for this industry that could have gone away forever. Could you explain maybe some good and bad anecdotes when dealing with so many small businesses?
John Nese: The bad what?
Audience: Just stories about dealing with so many small companies, maybe some good stories or some bad.
Peldi: do you have some vendors that are easier to deal with than some others?
John Nese: Well you know when you are dealing with little people your size you know exactly what they are going through and they know exactly what you are going through. And their attitude is going to be the same thing. You know, you have to make a profit. You can’t run a business without a profit. And they understand that, and I would say the larger the vendor becomes, the more problems that you have because they want to control you. They want to do anything they can to control you and take your flexibility and your freedom away. And what you are doing is really important you know, you all know what an impact the internet has had, you all know what you are doing, but there is a problem out there and it’s called control. And the big guys want control and it’s your creativity that is giving them fits, you may not know it but it’s giving them real big fits because they can’t control you. And that is your edge over everybody. [Applause]
Peldi: one more question, last question. Or we can skip dinner and stay all here tonight. [laughter].
Audience: ok so you talked about 97 as a goal and then 2001 as your goal, what’s your goal at this point? Are you in it to enjoy what you are doing right now? What kind of goals do you have at this point now that you have survived?
John Nese: Well we are going to go into…well I can’t unveil it, I really can’t. But we are going to do things that the other these pyramid schemes can’t follow. And when we do that it’ll take another step and set us completely apart from what they are able to do. Coz all they are able to do is just sell. And if ever get into those places, Peldi, if you ever get into Los Angeles I’ll take you out and show them to you. You walk in, the person who made the investment, he has nothing, people have nothing to do with the day to day operations, the people behind the counter don’t know anything about what’s going on. And it’s really interesting, one of the managers from one of those places who is just an employee, he is sending customers to me, so they got a much wider selection.
Peldi: they are not committed to the business.
John Nese: Yeah but he has a little more than most of the people that are working in the stores. I mean if you’re going to make your own you have to be there, and if you are not going to make it your own don’t invest in somebody else’s idea, invest in yourself. You’ll be way ahead. And you will be a lot happier. Believe me you will go to work every day, and you’re not going to work, you’re going to play.
Peldi: Alright, last one.
Audience: just a follow up to the previous gentleman’s. Do you always drink your soda straight, do any of them make any interesting mixes or cocktails etc.?
Peldi: do you just drink the soda or you still use it to make cocktails?
John Nese: Oh no. I like just the soda, by itself. I’m very happy with it.
Peldi: Alright and with that bombshell, thank you very much. [Applause] Thank you.
Next AMA: Alex Osterwalder, Author, Business Model Generation, 24th Jan 17.00 GMT.
Don't Miss a Thing - Get BoS Updates
Want us to let you know about new talk videos, speaker AMAs, Business of Software Conference updates? Join the smart people who get BoS updates. Unsubscribe anytime. We will never sell your email address.