Season 2, Ep. 5 | The Wonderfully Acidic American Vinegar Works Transcript

​More Elephant Intro

[00:00:38] Jason Rudman: My guest today started a company with the belief that vinegar was “no art, all acid,” and the company that he started also went back into the eighteen hundreds to relearn and recreate through craft fermentation, the ability to deliver amazing vinegar to our tables.

And so I'm delighted to welcome Rodrigo Vargas to talk to us about his wonderfully, sour story of American Vinegar Works.

Rodrigo, welcome to the podcast. 

[00:01:14] Rodrigo Vargas: Great to be with you. Thank you so much for the invitation and I'm always happy to talk vinegar, but especially so with someone from my previous corporate life. So, it's great to be here.

[00:01:24] Jason Rudman: Indeed. We should always say, the avenues of American Express, because that's where you and I first met, run very, very deep.

I feel like we could list a number of people who we are still connected to today from that period. So yes, we're both grateful to American Express. That's how we met.

And more importantly, for those of you listening to this podcast, Rodrigo is on the shop floor, as they like to say. So, he is in the production house. I saw barrels of vinegar working its way through the system as we recorded this. So, he is not only hard at work, but live at work right now, from the floor of American Vinegar Works, which is in the Boston area.

So, we always like to start Rodrigo with everybody's origin story. Where are you from, what interested you at a young age and what meandering road led you to vinegar?

[00:02:21] Rodrigo Vargas: Yeah, other people speak briefly, I don't, so cut me off Jason, as we go through this, but because you were asking for quite a while back.

So, I was born in Portugal—my family emigrated to New Jersey when I was a kid. I grew up in New Jersey, but spending summers being shipped back to Portugal.

And I went to school in New Hampshire. New Hampshire, the big city was Boston. I was a strategy consultant in Boston and then I moved down to New York. I went to Columbia to get my business degree and from there, actually a corporation, a startup and then eventually American Express.

I apologize for the noise if you're getting in the background, but we are in this old mill complex that's actually on the National Register of historic places. And there is always construction or trucks, or…it very much is not a corporate office tower here. So, apologies if you get some of that background noise. 

[00:03:20] Jason Rudman: Authentically, we are coming from the production floor…and it sounds great. It sounds great.

[00:03:25] Rodrigo Vargas: That's right. So, I would say that up until that point, immigration aside, pretty traditional path and maybe actually a path that's directly linked to immigration, right. 

So, your family emigrates, they put in actually a pretty big sacrifice to move cultures…is a big sacrifice. And I think sometimes people don't fully kind of like get that, that bit; there is, to a certain extent, an obligation to succeed, an obligation to follow a more conservative path, which I've always thought is pretty ironic, right?

You have people who've taken this wild sort of risk by emigrating and then their first generation of kids is expected to take an exceptionally conservative path of you go to the Ivy League schools, you become a strategy consultant, you work at big corporations.

And it is quite a contrast coming from…as the offspring of people who are exceptionally risk open in a way to then be expected to be so conservative. But I did follow that very conservative path, I did follow that kind of external validation. As I say, good schools, good jobs, name brand sort of companies. 

And all along the way, I think that I was sort of fighting myself a little bit. The things that I did at American Express, at Citigroup, at Asurion, like all these places, there were always in areas that were new product development, strategy, innovation, breaking into new markets, launching new products. That's what always what I was passionate about.

So, this idea of creating something was really important to me. I think that there was a tension though of true entrepreneurship where you just go out and just do it kind of on your own. So, here I was creating all this stuff in the context within a larger corporation.

And my feeling, which is, you know, maybe bias, maybe my own path, was simply that large corporations are great places with great speaking points about innovation. But the truth is, if you're a large corporation, you have an established base of business that you are doing and that established book of business is the most important thing.

And it felt sometimes to me that innovation in the context of a large corporation was more something that was said almost for PR purposes. Not just PR to the market's purposes, but for your own personal career advancement. So if you were on that big ‘name brand’ project, it often felt like the success or failure of the project itself didn't matter. It mattered how much that project got attention across your organization and that you could talk about it at your end of year review and you could do everything.

So, you always had these massive launches to tons of fanfare. And then once it was launched, a lot of times it was shoved in the corner. It didn't really succeed, didn't do anything like, it was innovation for the purposes of market. And I don't even mean consumer market. I mean for something that you could, I guess talk to your investors, talk to the marketplace about, and for managerial professional development.

Not something to me felt like corporations really wanted to do and really championed because, as I found as an entrepreneur myself, you can launch something and then it takes quite a while to build and to sustain that launch. A lot of determination to make it happen and to truly make it a success or to try to make it a success, right?

So faced with that. I was like, well, I want to do something that's actually on my own, something that I can be proud of. Something that I have as much control as one can exert over something, that is so dependent on what happens on the outside in terms of market forces, customers, et cetera, right?

So I was like, okay, I want to do this thing. I want to build something on my own. I want to seek this sort of independence of my own path. And that came shocking against the, I'm a giant wuss, and I'm super conservative in the context of my career and what's expected of me and financial stability and all this other stuff. So my path was actually starting on something called a search fund.

So a search fund, it's like a stepping stone drug؅—you know, when your listeners were born here, but when I was a kid in school, it's like pot, it's a stepping stone drug, you know, like it was this thing, right?

So search fund was my stepping stone sort of drug. The idea is that it's pretty much a very small private equity leverage buyout, where you'd go out and you'd find an existing company. I think they called it entrepreneurship through acquisition and it's usually a really, really dull type of company.

A prime example would be something like you have an elevator inspector company and the elevator inspector, it doesn't matter if the economy's up or if the economy's down, you're required to get your elevators inspected, right?

So that person you would think might have pretty steady cash flows. That person may be reaching retirement, may have just been fed up with the business, may not have kids who are interested in taking over the business, et cetera. So, they're looking for an exit for this very small business.

You go out, you find investors to partner with you and you get a bank to give you a sizable loan and you do a leveraged buyout of this little business. And, this is a much smaller version of a private equity [PE] house because PE is not going to be interested in companies that are this small necessarily though there have been private equity firms that have moved further down.

You take over the business, you put in sweat equity into the business, and over time, you've paid off the debt and you know, if everything goes as you want it to be, lo and behold, and seven, eight years, you are now the owner of this business. You've paid off the debt and your investors have been paid some cash as well.

So, this was sort of like training wheels, entrepreneurship idea. I left corporate, I was like, I'm gonna do this. It was sort of my attempt to control for risk in a place that has tons of risk and tons of delusion, which is entrepreneurship. 

[00:09:26] Jason Rudman: So getting you to this point is the spirit of immigrants coming in, which is high risk. And then your story is a very common one, which is the first thing that is searched for is stability, right? The ‘work hard, go to school, the blue chip,’ that's actually all about we got here now your responsibility, Rodrigo, is stability. Right? 

You mentioned briefly the moment, we'll call it a More Elephant moment for branding purposes. When was the moment where the entrepreneurship, the innovation internally, and you painted a great picture of how that made you feel, the moment where you said, okay, now I've gotta go searching for the search fund?

[00:10:09] Rodrigo Vargas: So, I guess still coming from that very calculated risk perspective and much more, multiple years of being like corporate America's gonna crush my soul at some point, I know that I need to do this. How do I do this?

I made this decision that I was going to look for a search [and] then I started saving to have funds because you quit your job and you do it to be able to sustain myself while doing that, right? So, it was this very like, calculated thing.

And I know that folks have this, I just have this moment, and it hit me…and I'm learning to be that person, but it really is not me. It is more like I saw an opportunity, right?

So, even when I'm going through the search fund, I'm looking at these different businesses. I'm doing it full time. It was almost like getting myself comfortable to be poor, getting myself comfortable to be under-resourced, getting myself further and further out on that edge of comfort. Something that I don't think I was willing to do or open to doing, coming right out of corporate. It would've been like jumping in an ice water and dying from shock.

I kind of just went a little slower. I ended up in the same spot, but it went a little slower. So as I was doing this search fund looking, I was looking at different business, looking at different things. Really very systematic about it. And one of the businesses that I was considering turned out to be this food distribution business. And they were tiny.

We went through diligence. We actually had a number, we were going through the whole thing and in the diligence, I found out that everybody who worked at this little company was either a direct family member or they were an undocumented worker, all of which meant I couldn't possibly buy this company because I wouldn't actually be buying anything.

But, as part of the diligence. I was exposed to more ‘food as business’ side, and they had this little bakery bread line that they were selling into Whole Foods, just something small, and it just got my mind going. I'm like, instead of buying somebody else's mess, I'm going to create my own and I'm going to do something on my own. And that was through that diligence, that was the tick for me.

Then, I started going down much more, in that systematic business consultant way of okay, up and down the supermarket aisle. What am I actually interested in? And this started connecting back to my upbringing. I mentioned I went back to Portugal each summer, but when my family was in Portugal, you would go to a specific town to eat octopus. You'd go to another town because they had the specific type of wine or because they had these cakes or something, right?

It was a very food obsessed sort of existence, not in the modern American foodie sort of way, but really just in a more traditionalized way of focus on ingredients, focus on product. It wasn't like gourmet food in the sense of here's something super expensive. It was quality driven and authenticity driven sort of food.

So, I've always been into food, into wine. As a little kid, I made wine which is sort of crazy. My dad says, it was actually my first venture into vinegar because the wine was so bad. But I've always sort of been interested in that from a personal perspective.

So as this deal sort of fell apart, I started thinking, well, screw this. I've come this far. I'm just going to do something that I really care about. I really don't care about something like elevator inspectors, the businesses for which this model existed. And, first I started looking at booze and the economics looked horrible to me. Then I started looking at drinks and I thought that was bad. And I was just up and down the supermarket shelves. And that's where I had more of a market aha moment of vinegar. 

There's all these other food categories [that] have premiumized in some way. The packaging looks better, the ingredients look better, the exposure of it is better. But here's this little category, which not so little actually that's been established. It's not like I don't have to teach people as much how to use vinegar because it's been around forever. It's not fake meat. It's just like, here's this product category that it is full of flavor, could be so much better that's really been ignored.

And that was like, yes, this sort of makes sense, but I didn't go, this makes sense, let me launch it. I kind of used, this makes sense, now let me do a full market review of what vinegar looks like in the U.S. What the brands are like, how they're positioning. Okay, that looks good. And then it was like, okay, this is great. I'm going to do vinegar. Followed by…I have no freaking clue how to make vinegar.

You know, vinegar is an insult in a lot of wine making countries in Europe; it's like, if you make bad wine, you make vinegar. So, I went through this process then of how is vinegar made? Can I make a differentiated vinegar? How is my process going to be different than industrial vinegars that I think are pretty crap? How am I going to actually do this?

So, I started constructing an acrylic box, this stuff, in my basement. I was living in Cambridge at the time; we had moved up because my partner was going to business school. So, I was making vinegar in the basement using two different ways of vinegar making, right? So, these little processes, micro batches, where I'd put the same wine through both vinegar making all to come out at the end and say, is my stuff better? Is my stuff actually good? 

[00:14:58] Jason Rudman: So, let's take that back. You search the landscape. You're up and down somebody's grocery aisle, many grocery aisles. You're trying to find where the opportunity is. You have an aha moment about vinegar, which then takes you back to when you were maybe five or six years old, where your dad then reminds you that you actually tried wine and it tasted like vinegar.

So, you know, as people talk about their stories on More Elephant, it's amazing how the connection to now is ‘deep seeded connected.’ It just reveals itself over a period of time. Then you start micro batching in your basement in Cambridge. So, there's a science to making vinegar, right? How do you learn through and teach yourself the science?

[00:15:43] Rodrigo Vargas: Yeah. So just if your listeners are curious, basically vinegar at a very high level, you need a couple things—you need alcohol, you need bacteria, you need oxygen, and you need time and you need heat. This is like you left your bottle of wine open and it starts going right. So over time, acetobacter, which are bacteria that make vinegar, they exist everywhere; they're in the air. They will start eating away at the alcohol and converting the alcohol into an acid and that's how you get vinegar at a very, very, very high level, right?

So, I started digging on how vinegar is made now, how vinegar was made before, and the progression between something that's really old, like put it in a barrel, leave it in a corner, and how vinegar is made today, thinking that the production style as potentially were what was causing the problem with what I thought was a problem with commercial vinegars.

A lot of commercial vinegars you get, they're just like acid bombs. There isn't any other sort of nuanced flavor to it at all. Sometimes, people will get cutesy and put different flavors in there, but the underlying vinegar is pretty basic. It's like one note hits you across the head—it's acid, right? And it could be and was so much more.

So, how I started looking at this was going back into different industry and academic texts from before because I was never going to come out the gate and say. I'm going to compete with Heinz distilled vinegar, right? That was never going to be something I was going to do. It's all about scale. It's all about the lowest cost possible. You know, it's a cleaning product, right?

So, I was never going compete at that level. I also knew I didn't want to just be this little crafty thing on the end there that would never have scale, would never have a consistency of product where a bottle of vinegar would cost you fifty (50) bucks. Our goal is to be the American mass premium vinegar of choice. That's what we're out to do. Bring people better vinegar.

Yes, it's going to be a little bit more expensive than your Heinz distilled. I mean, Heinz distills can be a lot more expensive, but it's still thirteen (13) bucks for a bottle of vinegar, right? When's the last time you bought a bottle of wine that was thirteen (13) bucks?

We still wanted it to very much be accessible but at the same time reflect a product of higher quality, right? So, to do that, I needed to be able to find a method and a production that justified the premium and that we could compete in a differentiated way.

We did at home tests and that type of thing, right? And I'll tell you about the farmer's market, but I will say maybe this was the first place where I hit tension between the business that I wanted to create and the way food businesses work right now in the U.S. I think a lot of folks may not be aware of this, but a lot of the food brands that you see out there, they actually don't make anything. What they do is they market things.

Even these younger, smaller food businesses, what they're doing is they're going through things called co-manufacturer or co-packers and they are getting somebody else to make their product. They're slapping a label on it, and then they're telling you they're from Brooklyn and it's authentic, and here's all this great stuff, and they're just spinning.

It's like this craft washing model that exists not just with big companies but with small companies. And for us, there are two things—one, the way we make vinegar, and I'll go into it, just doesn't exist anymore. It did exist until the early nineteen (19) hundreds, but it's more expensive. It's a pain in the ass to use. It just happens to produce much better vinegar. So, there are no co-packers or no co-manufacturers that were going to make me this type of vinegar.

But there was a question, there was this question where people were like, oh, vinegar sounds great. It's a fuddy-duddy category. Maybe just slap a new label on it, bring somebody else's vinegar and just market this product, right?

And in choosing to do this, I'm not sure it's the best business decision, but it certainly is the best, I think more like fulfillment, what I want to achieve decision. It was that first point of making a decision. I want to have a great business and I want to have a great product. And I think that there's viable paths to having a great business with the real lousy product, like a really lousy product.

Yeah. And you see, I see that a lot, at least now learning inside the business. I was just at this conference. There are a couple of big food conferences that exist in the U.S., and they're trade shows and they're aimed at getting your stuff on a supermarket shelf.

And, just this weekend at a large one called Utopia, which is in Denver. It's like this big food show and we hadn't gone to that one before and everything there was…do you remember, I think it was Madlibs, you know, you have something in, then you put something in and fill in the line with any random word and it constructs. It was like that.

It was take any base product that's normal, like ice cream, and then slot in one of ten (10) functional ingredients and put it in the product. So, it was ice cream but it was protein and there was collagen and then it was tea, but this tea came with ten (10) herbs. And it just felt like, all of these folks creating these Frankenstein, on-fad sort of products that, by the way, I'm convinced really got all the grocery store buyers excited and would move off the shelf for a year and maybe you can sell in a year because you've gotten so big.

And I was just like…and all of this stuff is crap. So much of this stuff was crap, right? But from the business side, it was perfect. They'll grow so much faster. It's just not what I wanted to achieve, right?

I hate saying this, but if I wanted to just optimize for everything, I would've just stayed in a corporate environment, produce whatever the hell my boss told me to produce for the sake of getting the great rating and the bonus at the end of the year and keep on going. What I'm working to do instead is create something that I think is lasting, that is an excellent sort of product. That's a longer path than creating a brand that's on trend right now. That trend may fade. 

There were brands created all along—keto, right? They were geniuses. It was beautiful. And now all of a sudden, keto is gone and those brands are gone. And I am not sure what you built at that point; maybe you built something great, like it was just a fast little exit.

But that's not ultimately what I wanted to achieve. And that first point of, do I just brand something and market it as opposed to [do] I build and create that was really that first inflection point for me.

[00:22:13] Jason Rudman: So, you're very deliberate about how you want to show up and how you want your product to show up.

You also mentioned that you reignited or you give birth to the old way of reducing vinegar through fermentation, which takes us back to the nineteenth (19th) century. And I know that it's not as simple as somehow you found a barrel and you connected a couple of pipes. There's also another scientific angle to this that involves universities within the Boston area.

So, you do the research, you realize that you're going to premium-ize the product. It's about the experience. How does that lead you to universities in the local area and then reimagining vinegar production with a nineteenth (19th) century barrel and production ecosystem?

[00:23:08] Rodrigo Vargas: Yeah. So, high level three big buckets of making vinegar. There's the old school—put it in a barrel, leave it there. Could take six months or a year for it to become vinegar. There may be some inconsistencies in the product.

Then, there's the modern way of making vinegar. You can picture a little aquarium stone that sends out little bubbles. Those little bubbles are air and bacteria. They're injected in there. Think of it almost like it's a pressure cooker. You can make vinegar in two hours or two days, right?

And then there's this spot in the middle which is the process that we ended up with. It's called the German, or the drip method. It was super high tech at the time; now, it's just retro tech. But the idea was you spray vinegar onto these platforms of wood chips and that gives the vinegar all of this surface area, right? 

So, remember I said vinegar needs oxygen, bacteria, and alcohol. You're exposing more of the alcohol with the bacteria to the air by providing more surface area for it to be on and, at the time, that meant slightly faster vinegar, right? So, for us, fermentation takes a month to two months depending on the type of vinegar using this middle method.

When I started from a business perspective, it was like there's no point in doing the modern because I'm never going to compete because it's a volume game and it's a low quality game. I could either put stuff in the barrel, let it sit, or I could try to recreate these machines.

We found these old etchings—actually, you know, in the eighteen (18) hundreds, everybody was into technology—and so, there was these old etchings, old encyclopedia set at the National Library of France that had etchings of different industrial production methods that the lay person was interested in.

And I found this old etching of this method of making vinegar there. So, I rebuilt the method myself; go to The Container Store, get acrylic boxes, drill holes, get aquarium pumps, recreate this machine in a very basic way that was not food safe at all. It was just for home, can I make better vinegar?

I started making vinegar that way and I started making vinegar in the, put it in a barrel, let it sit there method, to compare these two methods. Once I landed on the stuff that is going through this machine actually is better than the stuff that's just sitting in a barrel, it was like, I'm going to do it that way with a little bit of a twist.

So, a friend of ours is literally a rocket scientist and he was a rocket scientist at MIT {Massachusetts Institute of Technology] and I was talking to him— I need to make stuff out of food safe equipment. I have no idea where to start.

The products I created were like digital products, experiences, services. I've never built anything. I'm the least handy person ever. So he's like, “look actually MIT is really expensive, so we go over to Boston University (BU) and they have a welding shop. And sometimes when we're doing parts for our telescopes or rockets, we get them to do the welding on it. So, he might actually be able to help you.”

I approached the welding shop at BU that literally is doing rocket components for this guy and he was able to take the etching and take the design I had created, retrofit some stainless steel equipment for me to make one or two of these machines to actually get them working. So, in January of 2019, we got our official food manufacturing license. We're in the back of a little commercial kitchen. I'm literally lugging vinegar and alcohol around.

I have two of these tiny little machines that make forty (40) gallons of product and I have eight little old barrels. The production method that I've come up with is you take that machine from the eighteen (18) hundreds, turn it into stainless so you can control the quality and then afterwards, you age it in wood. So, combining the best of both of those, or what I thought was the best of both of those.

And, our vinegar takes a long time—six months, two months of fermentation, four months in wood. It's June, July of 2019 and I'm ready to try to sell my first bottle of vinegar and where you sell little food businesses…at farmer's markets. So [I] go to a farmer's market, totally nervous. It was a complete disaster. Can't get my tent up. It rains because it's New England in the summer. So, one of those summer storms, total mess, right?

But, my first customer was a reporter for the Boston Globe, so we very quickly start to get picked up. And then, within a couple of months, actually Florence Fabricant, who is a famed food writer, she writes about us in the New York Times, and there's like all of this external interest that starts to happen and people are validating the quality of our product and doing that thing.

So, I was doing this all by myself, bootstrapping everything and trying to get more of that market research. And to the extent that you have folks on the call who are actually into entrepreneurship, thinking of doing their own thing, I'll say my one regret is having been too conservative and too slow, right?

Too hesitant to take money. Too slow to build actual capacity in any of this stuff because I wanted a certainty in a space that has no certainty. So, I did a whole lot of extra market validation than was, I think, potentially needed. And entrepreneurship can be a very long and slow and sloggish and emotional and draining sort of place. So, to the extent that you could move faster, move faster on your journey 'cause there's a lot to be done. Yeah.

[00:28:19] Jason Rudman: Let's go down two paths. That's what I love about these conversations. So, Boston Globe to the New York Times, you're a one person show... 

[00:28:29] Rodrigo Vargas: Totally.

[00:28:29] Jason Rudman: That creates demand.

[00:28:31] Rodrigo Vargas: Yep.

[00:29:43] Jason Rudman: So what did you do? And the second part would be I'd love for you to explore the scaling, financing arm as you try to meet the sanctity of what you wanted to create, right?

So there's this beauty in what you described. It's vinegar with sophistication.

You've got all this demand. And then you mentioned that one of your More Elephant learning moments and you called it a regret…I don't think, you know, not a regret, but something you learned along the way was you wish you would have done some different things to scale. 

How do you address that arc?

[00:29:06] Rodrigo Vargas: Yeah. I ended up doing a small raise or smallish raise, like a friends and family raise, to get capital to build scaled versions of our equipment and have our own facility, right? Once I got enough market validation out there, I said, okay, well, I need to do this right, because I wasn't paying myself, I'm still not paying myself, honestly.

There is this period of growth. So, in 2021, within two years we moved, and by the way, I was working consulting gigs on the side to keep this stuff going. Like that was the model. And I was like, well, I'm just gonna do it myself instead. 

[00:29:37] Jason Rudman: You throw that in, but that's a really, really important point. Like you're all in, but in order to keep this dream alive, you've got side hustles and farmer's market visits on Saturday mornings, so...

[00:29:48] Rodrigo Vargas: Totally. And, by the way, I will tell you there's an ego hit as well, right? I'm literally with a little cart lugging bottles of vinegar into farmer's markets and inviting people to taste it and it is a very different reality from corporate, especially in the beginning.

And as you're doing it, what makes that so much easier is, I was really proud of the product. It's a great product. There's nothing in there that I would have any hesitation of telling somebody, who's into vinegar, to taste. It is the best vinegar on the market.

And in 2021, I was like, okay, we have enough market validation. I'm going to go out and I'm going raise some cash.

[00:30:23] Jason Rudman: You just skipped the pandemic. Are we going to talk about the pandemic?

[00:30:26] Rodrigo Vargas: Yeah. So that was great. It was pretty crap, actually. So at the time..

[00:30:29] Jason Rudman: I was going to say maybe you skip past it because you're like, just for everybody, it was pretty crap. 

[00:30:33] Rodrigo Vargas: Well, there were all these food businesses that made so much money because people were buying stuff online. We weren't yet set up.

So, think about it, I didn't sell my first bottle of vinegar until the summer of 2019. I pretty much then had this year where I was selling to little stores and mostly at farmer's markets, hadn't built up an e-commerce built business, hadn't done any of that.

So, we did get into Whole Foods in 2021, up in New England, but it was incidental. They came to us. I didn't even know. Like, this is not a business I had grown up in. It was like learning it as I was going and I was doing these consulting gigs. My time was split.

I was like, this is ridiculous—what I'm going to do instead is I'm going to do this full time and I'm going to quit this consulting gig, and I'm going to raise some cash and I'm going to build a facility and this is all that's going to happen. So, it was March and I quit the consulting job and then later that month, in March, everything shut down.

And, I was living between two spots. My partner had gotten a job down in New York, even though we were in Massachusetts. My facility was in Northern Massachusetts. It sounds grand; it was a shared little room in the back of a commercial kitchen. I was living in what I call a divorced Dad motel, so it was on the border of New Hampshire that was close enough to this facility that I could leave my stuff there.

My partner had just started a new job back in Brooklyn. He was pissed that I was not around for his new job. I was pissed that here I was, driving up and down, where I had this fixed business that he got up and moved to New York and expected me to do that as well. I'm moving, happened that my consulting job was in Boston, so I'm moving back between Boston, Northern New Hampshire, divorce Dad Motel. The stuff down in Brooklyn, it's just like, it's all kind of happening. I quit the consulting bid to be like, I'm all in or not. This is ridiculous. And then the world shuts down, we are in Brooklyn and there are bodies piling up in containers outside. And I'm like, there are no farmer's markets to be had.

Fermentation is, again, because we're self-manufacturing, I had to keep those things alive so I would drive—and at the time, food was an essential thing, so we could [drive-—I would drive my sedan from Brooklyn all the way up to New Hampshire, not stopping anywhere along the way because [of] COVID and it was early and nobody knew what was going on.

Disinfecting stuff with spray bottles all the time, as we all did, my weekly clean out of these fermentation machines, otherwise they would overflow and flood the whole facility. Yeah. And so that was COVID. 

And then, there was a six-month delay. So, we raised a little bit of money. We got our own tiny facility, which is where I still am. Right? We try to renovate the facility. It's two thousand (2,000) square feet. It took six months to renovate it because there was no labor, there was no access to people during COVID. By the end of 2021, we finally set up this facility and we start growing afterwards with direct-to-consumer sales off our website and we experienced a good amount of growth.

And we continue to get great press, like Bon Appetit, Food and Wine, The Food Network. We got some coverage on television. We've sort of been able to grow a little bit that way. We do some online advertising, which I will tell you, I think only makes Mark Zuckerberg rich, but at least exposes our brand to some folks and we're trying to get to scale enough.

The goal is grow as fast as we can to be able to absorb the fixed costs of the facility while we continue to educate people about vinegar because here's the catch…here's also a learning. The reason there wasn't tons of innovation in vinegar is you buy a bottle of vinegar, and it may take you six months to come back and buy another bottle of vinegar.

So, the brand building associated with something like vinegar is more of a long-term brand. We've been really lucky now that we have great repurchase rate in a very loyal customer base, and we make over seventeen (17) different types of vinegars. But there is this idea of building something that's solid and building something for the long run takes a while.

I could understand why somebody wants to just sell a fad food that has ten (10) different health claims associated with it, that in a year is going to be gone because, in the year that it's alive, it's a hell of a lot easier to get that stuff out there and kind of try that growth. The long brand build, the solid product is a different path, and it is a little bit harder, but I think it is the right path.

I've even seen changes in the VC environment as it came from CPG. There were a lot of finance tech bros who were like I'm just going to toss tons of money. All I care about is the top line. And it really messed up the economics of the food business because all these other players got used to brands that had all this VC money and they would buy shelf space and they would do all this other stuff.

If you're building a real brand, a brand that your grandfather would recognize, it's really hard to compete against those guys. Well, fast forward, the finance bros have decided that, turns out you can't just be focused on top line. They've told us all along that you need to be profitable instead. 

It has been so interesting to see the ecosystem evolve. It is so interesting to deal with brands and investors and supermarkets and food distributors and really see how the food system comes together.

And we're trying to walk a pretty narrow path. I think where we are now is we are completely out of space in our facility. We continue to take on large supermarket chains, but we're still pretty much putting everything into the business to have it grow and to reach that stability, that stability sort of space. 

So, you're talking about capital at the space where I probably will have to take on some new investors and do a real round beyond just the friends and family round because all of the funds that we brought in are associated with manufacturing. And now there's this whole opportunity on marketing and we will have to tap into, otherwise nobody will find out about our great vinegar. 

[00:36:36] Jason Rudman: I love this. So, like many entrepreneurs I talk to, when I hear your story, you fell in love with a problem that you thought you could solve. You also mentioned that by happenstance you found your way into Whole Foods.

[00:36:48] Rodrigo Vargas: Yep.

[00:36:49] Jason Rudman: So how did the happenstance of Whole Foods, which is on face value, one of the places I would assume for a craft vinegar, that's a shelf that you would want to be on. How did that come about?

[00:37:02] Rodrigo Vargas: Yeah. So this was again, COVID. We had applied and we, as the royal we here, because up until a couple years ago, I had no employees. It was just me. So when I decided I'm gonna go at it my own.

[00:37:13] Jason Rudman: You're in great company with the royal We.

[00:37:16] Rodrigo Vargas: That's right, that's right. The company of the royal We.

And so, Chobani had a food incubator program and I applied to that program before COVID; it was supposed to happen during COVID and it turned out to be a virtual program but we were taken in. I think we were one of eight companies nationwide that they brought into the incubator program that year.

That was part of that validation component that I was like, okay, it's not just me, the people who tasted like it. People who are in the industry see potential value in the program and in the product. And Chobani actually posted about us and somebody from Whole Foods reached out to me and they're like, you're a product that should be in Whole Foods. Are you in Whole Foods yet?

I knew nothing about any of this stuff. And they [Whole Foods] have these good programs and they literally waited for us to build out the facility to have the capacity to get them the vinegar and brought them on. So, we've been with Whole Foods since the end of 2021, beginning of 2022. It was a little test. And then, they expanded us to every store in New England. So, you can get four of our vinegars there, right? 

And with all these little gourmet shops, some of them not so little, gourmet shops throughout the country and a lot of times they were coming to us. Only recently have we begun really going out and saying, hey, we have this great product, we should be on your shelves…hive your customers something better. 

So, in terms of larger supermarkets, we’re here with Market District, which is part of Giant Eagle, they're like Ohio, Pennsylvania sort of area and we started with them in December. There's a supermarket called Big Y which, again, catches some of the New England area. There's all sorts of gourmet shops throughout all fifty (50) states that carry us as well, and we're trying to build in that direction. Some of this stuff happen to us rather than us really trying to build and part of that was just selling in as a small brand into very large accounts, it takes a long time.

If a very large supermarket tells you yes today, it may four to six months before you're actually on their shelf. So, we were starting with consumers who could quickly decide to make a purchase on our website, right? So if you're at americanvinegarworks.com, you can get anything you want.

And those were the customers, like first at farmer's markets and then e-commerce, people who are really passionate about ingredients like I I am. And then building with I think some strategic retail partners along the way, which were doing a lot more of now, right, because we need to get to that next level of scale and growth if the businesses and the brand is going to have reach and be viable in the long run.

[00:39:45] Jason Rudman: Okay, come on everybody. We're manifesting American Vinegar Works in Erehwon and other places. Branding and marketing—so at its highest level, when I pick up a bottle of American Vinegar Works, what do you want me to feel?

[00:40:01] Rodrigo Vargas: I want you to feel that you have picked up a really high quality product that you can use every day in your cooking.

It's something that is both tied to tradition—it's not a fake meat, this has been around forever—and it is an essential cooking ingredient that a very small amount of it is going to make a really big difference in your food.

And that when you look at our bottle, and I know where folks are just listening, they're actually very stylish and very modern looking as a product. And we did that consciously so that you could recognize that there was something that was new in this. Right?

What really matters about our vinegar is how it tastes. The packaging helps us communicate that it is a premium product, and I hope that the name helps communicate both a sense of place and a sense of tradition, right? It was a conscious decision to say, American Vinegar Works. What we do is we only start with American alcohol, so wines and cider and beers to make our vinegar.

It's this idea of vinegar with a sense of place, vinegar with terroir [French for of earth or of land to describe the unique combination of natural and human factors that influence a product]. If you're taking a California red wine, it's going to taste different than a French red wine. And so is the vinegar associated with it, right?

So, we're not trying to be anybody else. We're not trying to be this fun new product. I think we're a great, fun product, but we're not trying to be this “jazz handy,” look at us sort of product. We're trying to say, Hey, here's something that has existed forever, made in a new way and what's innovative about us is we find quality as innovation, right?

That there's so little quality in the food system sometimes these days. There's so much marketing, so little quality, that what we're bringing that's really differentiated is a really hell of a great red wine vinegar, right?

Our innovation is the quality that's in the product, but we're using some of the packaging to signal, this is different. You should pay attention to this bottle of vinegar versus the other stuff that you're seeing on the shelf because this is materially different.

[00:41:58] Jason Rudman: There is an undoubted elegance and, dare I say, sophistication to something that is on face value, vinegar. We think of it as incredibly simple, right? And so to the arc that you've taken us on, this journey that you've gone on to create a company with purpose. I think you've also created a product that when I look at it, there's a level of sophistication to it that invites me in to want to know more.

[00:42:27] Rodrigo Vargas: Yep. That very much is our goal. It's to look at vinegar in a different way, but not to put it on such a price pedestal that it is something that you feel like you can't use every single day. Because, acid is usually what's missing from people's food and vinegar is in just about everything. So, it very much is a platform to better eating across all of your dishes.

[00:42:49] Jason Rudman: I feel that's the other thing, or that's the other unlock here that you just talked about, from a nutritional perspective and us rethinking the role of acid and the role that vinegar can play in a well-rounded diet. How does that influence, as you build the company, the narrative that you can take further from a market education perspective?

[00:43:11] Rodrigo Vargas: Yeah. So, you know, we make over seventeen (17) different types of vinegars. We strive to educate customers on the different uses of vinegar with recipes and other things, but even folks who use vinegar, quite a bit sometimes use it just in a narrow band.

So, you use it for vinaigrette or salad dressings, but you can marinate with a vinegar, you can do a pan deglaze, you can make cocktails with a vinegar. You know, there's all of this really expensive, non-alcoholic mocktails. If you look at them carefully, probably their differentiated flavor ingredient in there is vinegar as part of one of the bases. So, there's all of this stuff that you as a consumer can do with vinegar, but from a business perspective, you can also look at vinegar as a platform, right?

If you start with a vinegar brand and if you have a differentiated vinegar brand, well, it turns out hot sauce that have vinegar, jams, mustards have vinegar, and all those companies are using cleaning product-level vinegar in their products. Over time, as we establish our core vinegar brand will give us an opportunity to explore other adjacent categories, where the vinegar itself can create a point of differentiation on that end product.

We're starting with people who cook, who are using an ingredient, and over time, we'll move from an ingredient to a more ready-to-use product that doesn't require somebody who knows how to cook. It just requires somebody who knows what's good.

[00:44:35] Jason Rudman: As you think about shuttling up and down in the middle of COVID between New York and Massachusetts and New Hampshire. If you think about the 6-year-old that fermented wine, and it was awful, but it was the first version of vinegar that they probably created. If you think about the immigrant story to, hey, the original path that I chose was stability. What is the journey of creating this company reaffirmed or taught you about yourself?

[00:45:01] Rodrigo Vargas: That I value independence, creativity, and creation. And yet, I'm still fighting my conservative inner child the whole way through. You just keep going but at the same time, I think maybe it's just for me, I think it may be true for a lot of entrepreneurs, there is a lot of doubt along the way.

And it is hard for me, maybe for others. It is an active exercise every day to try to focus on what has been achieved rather than what is still missing from the end goal that you had in mind when you started something.

There's a lot of mental training, mental gym that I am still sort of working on. And yeah, that one's a work in progress for me, but, I see where we're going.

[00:45:48] Jason Rudman: From me to you. I thought about being an entrepreneur. Maybe I'm not brave enough. I'm not sure. I like to be an intrapreneur, so maybe you can coach me on that on another day.

How can listeners learn more? How can people start working with American Vinegar Works and how can people get in touch with you?

[00:46:03] Rodrigo Vargas: So, just about our process and our product—american vinegar works.com, it's our website, so american vinegar works.com. You can learn about us, you can order any of the products.

We have a limited amount of product also on Amazon. If you look up American Vinegar Works, you'll be able to get it there. I know you have a varied sort of consumer base here so I'd say a couple of things would be—

• if you happen to be in food retail and you're not carrying our products, reach out. My email's really simple. It's rodrigo at american vinegar works dot com [rodrigo@americanvinegarworks,com]

• if you are in a corporate environment and you're looking for gifting we actually do great little holiday sets of vinegar

• if you are in press and you haven't covered us yet, and you want an interesting story, both about how production happens and how our vinegars are differentiated reach out to me directly as well at rodrigo@americanvinegarworks,com.

• if you have a super-rich uncle who wants to invest in building a brand new state-of-the-art vinegar production facility, have him reach out to me as well.

[00:47:08] Jason Rudman: Super rich aunt. She can also reach out as well. 

[00:47:11] Rodrigo Vargas: That's right. 

[00:47:12] Jason Rudman: Awesome. Thank you for spending your time. I love the story. Thank you for being vulnerable and taking us on a journey that is not complete yet. And I think that as people listen to this, they'll be scouring the shelves, and experimenting with vinegar in a way that they may not have thought about before.

[00:47:31] Rodrigo Vargas: Yeah. I hope so. And I really appreciate it, Jason. It was great to reconnect. It was a nice break in the middle of the day as well. So thank you very much and get the word out about great American vinegar.

[00:47:41] Jason Rudman: Good talking to you, Rodrigo. Thanks. 

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