Exit Like a Tycoon Without Losing Your Soul

 

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In 1995, with just $5,000 in start-up capital, Ashok Vasudevan launched Tasty Bite offering ready-to-eat Indian entrees to American consumers.

Twenty-five years later, Tasty Bite is America’s largest brand of prepared Indian food sold everywhere, from Walmart to Whole Foods. In 2017, Vasudevan announced he had sold the company to Mars, which has a portfolio of beloved brands including everything from Uncle Ben’s to Skittles.

This interview may surprise you on many levels, including:

  • Why Vasudevan considered valuation “irrelevant” as he evaluated the acquisition offers generated by his investment bankers at Goldman Sachs.
  • How Vasudevan financed his growth.
  • Why the best products are either “pain killers” or “pleasure providers.”
  • How a “call option” works for both investor and entrepreneur.
  • The three things every management team needs.
  • A philosophy to even out the natural highs and lows of entrepreneurship.
  • How two-way reps and warranties can ensure an acquirer doesn’t ruin what you’ve built.

Vasudevan was keen to start a new organization called C-SAW, which is dedicated to farmer prosperity, consumer well-being, and the transformation of the food industry to promote affordable wellness. It’s a big goal that he’s passionate about, which is why he looks back on his decision to sell Tasty Bite without regret. The secret to a satisfying exit is to have something to do after you sell, which is one of four factors we measure when evaluating your readiness to exit. Find out how you score on all four by getting your PREScore™.

Our guest

Ashok Vasudevan is a corporate executive turned entrepreneur and academician with an abiding interest in food & agriculture, international entrepreneurship and a deep commitment to affordable wellness through food and nutrition. Along with his wife Meera, he co-founded Preferred Brands International, a US-based food company that makes Tasty Bite (www.tastybite.com) and a range of other natural, ethnic and specialty foods sold in major supermarkets in North America, Australia, and the UK. Ashok is also Chairman of the Board of Tasty Bite Eatables Ltd, a public company on the Bombay and the National Stock Exchange. He has been on the board of several non-profit organizations in the US and India and is a distinguished visiting professor of International Entrepreneurship at Great Lakes Institute of Management in Chennai. Ashok Vasudevan graduated in Agricultural Sciences from Bangalore and went to business school at the Bajaj Institute of Management, Bombay and the Harvard Business School.

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Transcript

John Warrillow:

I’ve got a bit of a confession to make. I can’t stand it when companies call themselves mission-driven. I just find it so inauthentic, just a veil to try to disguise the fact that the company’s there to make money, which is why it was so refreshing to do this next interview with Ashok Vasudevan.

John Warrillow:

Ashok really is a mission-driven entrepreneur. And I got the sense very early in the conversation as you will and listening to it, that his mission was a no way a corporate veil. It was authentic, right down to the point when he was looking at acquisition offers, of which he had many generated by Goldman Sachs, he said that valuation wasn’t that important to him. In fact, it was one of the least important things. What he was trying to do was, in his words, land the plane in to the hands of somebody who would take his vision, and propagate it and grow it in a much bigger way. Here to tell you how to actually create a real mission-driven company is Ashok Vasudevan.

John Warrillow:

Ashok, welcome to Built to Sell radio.

Ashok Vasudevan:

Good to see you, John.

John Warrillow:

Yeah, it’s great to… It’s just great to learn about you now. I’ve seen Tasty Bite in the supermarket’s here in Toronto. There’s a chain called Loblaws, and it’s carried. So, I’m kind of familiar with the brand. But for those who don’t know tasty bite, can you just describe what it is that Tasty Bites sold?

Ashok Vasudevan:

Sure. Tasty Bite is a range of all natural, convenient specialty foods, ready to eat foods that are shelf stable, which means it requires no refrigeration, no freezing. And these are ready to eat. And we have Indian, Thai, Asian rices and sauces, and all range of products that be sold available in most supermarkets nationally in a few countries in the world, US and Canada being the largest.

John Warrillow:

How did you get into it? What was the start?

Ashok Vasudevan:

The story goes back to 1994. Meera and I… Meera is my wife, and the significantly smarter of the two of us but [inaudible 00:04:22] my wife denied. But she and I started this company with $5,000. This is the story that every entrepreneur, I’m sure really has seen before and experienced before. So we have… We started the company with $5,000 on our dining tip with… She was already a bit of an entrepreneur, I was more corporate. I had come out of Unilever and Pepsi, and she had come out of market research. She had already started a market research, a qualitative research company before and we relocated. And we were living in Stamford, Connecticut at the time. So we started that in ’94, and we grew from there.

Ashok Vasudevan:

But just say that we’ve had that business for about 25 years. We started with two of us and we ended up, I think with about 1500 people.

John Warrillow:

Unbelievable.

Ashok Vasudevan:

And just got lucky, I guess so.

John Warrillow:

Probably a little more than luck, which is what I want to get into. The actual cooking itself of coming up with the recipes, and packaging them for grocery stores, I mean, that’s a very expensive undertaking. Did you do all that yourself? Did you use outside vendors to do that for you?

Ashok Vasudevan:

Actually, we started as a trading company. It’s good to give you a little bit of a background. When we started as a manufacturing company, we started as a trading business. We had the rights to Tasty Bite. The company Tasty Bite itself was actually at the time based in India, and that company got acquired by Unilever in India as part of some ice cream acquisition that was happening. So, this is a very tiny company. We are talking about a sub million dollar company in India. And we just had the distribution rights because we liked that product, we liked the technology, we liked what we could do with that brand.

Ashok Vasudevan:

As things turned out, our business in North America grew, in the US. Then a couple of years later, in ’96, we approached Unilever, which by the way is the company I worked for a decade. And so I knew the people who were involved in that part of the world, and we actually bought Tasty Bite, the Indian subsidiary from Unilever, which was then a public company. It was actually a bankrupt. But by that time, it had declared bankruptcy, but there’s the whole story to the backend.

John Warrillow:

What did you pay for the bankrupt assets of Tasty Bite India? Like as a multiple of, how do you value a bankrupt company?

Ashok Vasudevan:

It’s an interesting question because at that time, the company, the share price of the Tasty Bite company, the face value of the share was 10 rupees. 10 rupees is basically a penny stock. And we acquired that business and we had a private equity join us, then we took control of that company. So we had to pay roughly what the share price was in the market, which is more than an asset purchase than really are. It was not like a multiple of revenue, and there was no [inaudible 00:07:46] company. It had wiped out its net worth eight times. It had Dollar debt, Yen debt, Deutsche Mark debt. It had pressing credit of about eight times the size of its revenue.

John Warrillow:

Why not just create your own brand? Why not just… I mean, instead of buying this company based in India, why not create it yourself in the US market?

Ashok Vasudevan:

It’s a very sophisticated technology. This was a company we could not have built from the scratch easy. Idea was a great idea. It just happened that it had not taken off, either in India or in its international efforts. We just happened to come in, and do a couple of things to the brand that just happened to resonate, that’s why I said we got lucky. Then we said, instead of building that factory ground up, which we could not have easily done, and there was a lot of skill in the business at the time. There was a lot of expertise.

Ashok Vasudevan:

And so all we did was to take that business, and it had 100 employees. It was a public company. It was a sorry state of affairs. It was a sick company. And it happened to be in a state, which I quite… Which I knew well. And India, I knew how to navigate business in India, because I come from India. I understood agriculture in India, even though I didn’t know much, too much about food processing but I did understand agriculture. So does all the right things to have done, and the US could never have been competitive when it comes to such value added play. We’ll get into that later, and there’s a lot of lessons here around…

John Warrillow:

Great. I’d love to get there. Before we do though, when you take technology, I think of a food company as food. I don’t think of technology per se. What did you mean by technology? What sorts of technology do you refer to?

Ashok Vasudevan:

Think about this. I mean, this is a technology called retort. And retort technology was actually invented way back in the 60s, but it was never… By The Apollo space program. And this is the technology that keeps food preserved without the need for chemicals preservatives for 18 months.

John Warrillow:

Wow.

Ashok Vasudevan:

And this technology, which is the retort technology has two parts to it. There is retort, which is the pouch, the material of construction of the pouch in which the food actually stays. And the pouch is a multi-layered laminate that has an oxygen barrier. it has a UV barrier. It has a moisture barrier, and a physical barrier. So it’s a four-layered pouch. So, part of the technology lies in the laminate of the patch. The other part of the technology is in the processing, and the processing of the retort pouch is… Think of it as a flexible can, the canned food except without the can, without the weight of the can, without the kind of carbon footprint of the can, without the energy intensity of an aluminum, and below the aluminum of course.

John Warrillow:

Sure.

Ashok Vasudevan:

So, this canned food without the can. And that technology is very high temperature cooking, high pressure, high temperature, and it stabilizes the food. So, it’s a very sophisticated technology.

John Warrillow:

And did the Tasty Bite own that technology, or did they just understand how to use it?

Ashok Vasudevan:

They understood how to use it. They had a lot of understanding of the soft. There’s a soft part of the technology, and there’s a hardware. They had the hardware, and took some time to perfect the software. And that’s what we did over the next 25 years. And by the time we started, we had obviously, we had a good base to bid on. Even though the business was bad, the technology was outstanding. So, we had a…

John Warrillow:

Where would you say that technology ranked in terms of your success relative to other factors like your ability to market Tasty Bite in the US, ability to sell Tasty Bite? What would you pinpoint as the key drivers of your success?

Ashok Vasudevan:

You’ve got a good question. It’s a great question, John. There are two questions in that. You said, where would you rate that technology in the success? I would say we probably succeeded despite the technology quite honestly, even though [crosstalk 00:12:27].

John Warrillow:

Help me square it. Help me square that because that doesn’t make sense to me, given that…

Ashok Vasudevan:

Because if you think of prepared foods, think of it you’re in North America. You’re sitting in Canada, you’re sitting in the US. When you think of prepared foods in a packet, what do you take? You go to the freezer, or you go onto the glass to a deli counter. So what you buy is either cold, or what you buy is frozen and you take into the microwave. You don’t go to the middle of the supermarket aisle because that’s where you will find a cereal, that’s where you’ll find the sauces. That is not where you’ll find your dinner. You’ll only find the components for the dinner. So for us to get in there and say, your dinner lies in the middle of the supermarket and not in the perimeter, that’s a challenge. So we might be in love with our technology, and therein lies the real lesson.

Ashok Vasudevan:

As entrepreneurs, sometimes we get attached to our own product, we get attached to our own technology. And those technologies are legends, and we become legends in our own mind. But the truth is, oftentimes, it has nothing to do with technology. It has to do with what pain you’re solving, or what pleasure you’re providing. Right? [crosstalk 00:13:43].

John Warrillow:

[crosstalk 00:13:43] Tasty Bites example, how would you define… Theo, I think it was Howard… I think it was in Howard Levitt Theodore or Levitt, the guy from Harvard, he says, nobody buys a quarter inch drill, they buy a quarter inch hole.

Ashok Vasudevan:

Wow.

John Warrillow:

The kind of benefit of that, what was in your, internally when you had meetings at Tasty bite, how did you define what you were solving, the pain or pleasure you were trying to provide?

Ashok Vasudevan:

We got lucky. Most people do one or the other. You’re either a pain killer. Entrepreneurs are painkillers. They see and pain in society, and they want to kill it. Or entrepreneurs are pleasure providers, so you’re a pleasure seeker, entrepreneurs can provide pleasure.

John Warrillow:

This could go in a very dangerous direction that you can’t think of. Keep going,

Ashok Vasudevan:

But it is telling them that you see the two come together, and Tasty Bite got lucky in that. For example, what is the pain when you go to a freezer and you pull out a product? Think of the pain. You think of it as ready food. It’s not ready. Because by the time you take it home, you got a problem taking it home in a car, so you can’t go anywhere else. You bought it, you better go home. After that, you’re not going to go to a bar to grab a beer, or you’re not going to go to your uncle’s place and hang out around. No. No. No. You buy that, you’re going home, so it’s already a pain.

Ashok Vasudevan:

Once you go home, it’s not dinnertime yet. You’ve got fry. And there’s a process of frying; you put it in the microwave, wait for three minutes, take it out, stir it, you put it in. And all the time there’s a certain association of guilt, and then you’re dealing with it, you burn your hand, put it… There is pain. At the end of it, at the end of five minutes, maybe seven minutes, it’s, but the food is way too hot you’ve to wait. It was way too cold, now it’s way too hot. And so really what you thought of as prepared foods is 10 minutes away, at least. That’s a pain. That’s one pain.

Ashok Vasudevan:

There is another pain. You look at prepared foods, and what do consumers do? You look at the back and you look at the label, and you look at those names that you’ve never seen, Ferrous sulfate, E [inaudible 00:15:57] calcium chloride. I mean, things that belong in a chemistry textbook, they don’t belong in food. That’s a pain because you don’t know what they are. Just because they’ve been approved, and what they call GRS, Generally Recognized as Safe, GRS doesn’t give you confidence generally recognized as safe. Meaning, eat it, you won’t die. What is generally recognized as safe? So that’s a pain.

Ashok Vasudevan:

The third is, it’s mac and cheese, or it’s just uninspiring food. It’s food. It’s just calories going in. There’s nothing there in terms of flavor. Or when you eat the food, there’s no aha moment. So, you’re eating it as a time of day. It’s not an activity where you seek pleasure. It’s breakfast time, lunchtime or dinner time. Ancient cultures don’t even have names for breakfast, lunch and dinner. Breakfast, lunch and dinner almost makes it time of day. It’s a chore you got to finish, so there’s not pleasure. Imagine these three? And imagine you could address all these three?

Ashok Vasudevan:

So Tasty Bite we said was natural; no chemicals, no additives, no preservatives, no GMO. And we made a simple promise to ourselves when we set up the company, we will not put into Tasty Bite what we will not put into our mouth. It’s a simple promise. Till today about 1500 people who go to the plant, but today, a few people go into the plant because of cold but that hopefully will change soon, make the same promise; we will not put into Tasty Bite what we will not put into our mouth. And we used to say a tasty bite is necessarily natural, preferably organic. And so that certainly takes away a pain to say, you know you don’t have to eat stuff that you do. Calcium chloride, really? Ferrous sulfate, how about that? Oh, so you know that there is a pain that’s being removed.

Ashok Vasudevan:

Now convenience, we call it convenience without compromise. Every time you have convenience, you know you’re compromised. Think of taking junk out of junk food. The second piece was to remove the pain. And in this case, we called it convenience without compromise, because you associate fast foods and convenience foods with stuff that is not good for you. And truth… Yeah, go ahead.

John Warrillow:

No. No. Forgive me, keep going.

Ashok Vasudevan:

And the truth is, we also had a little logo or mnemonic in the back, which said, one step one minute. So if you took a frozen entree and then you took a Tasty Bite pack, and let’s say you decided to have mediterranean organic brown rice. This is a good example. Buy a frozen organic or whatever brown rice that you’d like from the freezer, and buy the Tasty Bite brown rice, which by the way is organic. Go home. Now, go to dinner. You’ll almost finish eating before your partner who decides to buy the frozen even starts, because what do you do? You open the pouch a little bit, put it inside the microwave. You heat it. This is 90 seconds because it’s rice. And in the second minute, you’re actually eating it while you’re still deciding to pick off the top, you’re shoving it in and hoping, no, it stirs it.

Ashok Vasudevan:

So that’s the second where you solve the pain of time, and the pleasure of convenience without compromise because even this convenience comes without any mysterious… I mean, look at the ingredient statement of a Tasty Bite brown rice; it has rice, it has water, salt [inaudible 00:20:18].

John Warrillow:

Easy.

Ashok Vasudevan:

Cool. How easy is that? And the last one [crosstalk 00:20:25]…

John Warrillow:

I love it.

Ashok Vasudevan:

… Most people when you eat it, you know it tastes good because it’s got stuff in it. Artificial flavors, artificial colors, artificial something, that what makes it tasty. Yeah, the flavors are unique. So those are the three.

John Warrillow:

Excellent. I’d love to get into the financing of the business. You mentioned you started with Meera at $5,000 kind of around the kitchen table. It sounds like you brought in some… A private equity group to help you buy the Tasty Bite India Company.

Ashok Vasudevan:

Yes.

John Warrillow:

Maybe talk a little bit about How you financed the growth. Did you have that private equity group throughout the journey or did you bring on extra money, or how did it go?

Ashok Vasudevan:

No. So we started… We also had it, so we started with as a distribution company with $5,000 here and we went global on day one. So, we actually had a design of the packaging done in New York. Actually, upstate New York, very close to Connecticut, where we lived. The pouches made in Korea. Beyond the design, the carton was designed and made in Hong Kong. We got the product manufactured in Tasty Bite factory in India and [crosstalk 00:21:39].

John Warrillow:

It sounds like that would cost more than five grand though.

Ashok Vasudevan:

That, and we did not. And so, what happens in all of these is we have different players. You’re able to stack a business with getting multiple people to play a role and participate in the success. So we knew… I mean, we already knew the pouch maker. We knew them in my earlier life. We knew the carton manufacturer. We even got working capital for the seed company from a exporting… Beer exporting company in India. And all they had to do was to pay 50% of our order to Tasty Bites, which was broke to take or pay their labor. They could buy the raw materials and they would export. In return, they would get export credits, and they will make margin on the exports. We would pay them 120 days later. So we had our after the FDA cleared, we had 120 days to sell, recover the money and pay them.

Ashok Vasudevan:

So, it’s not hard to do if you have multiple players who benefit. But if we become the only beneficiary, then it becomes harder and harder. Because success of this kind requires a lot of people to succeed, and we could not have succeeded if each of these did not succeed. [crosstalk 00:22:59]. Yeah, go ahead.

John Warrillow:

But as you say, so the carton manufacturers, the pouch manufacturers, if I’m hearing you correctly, gave you very generous terms to pay?

Ashok Vasudevan:

Actually, they didn’t give us very generous terms. They gave us reasonable trading terms, but we had another exporter. So look at it this way, let’s say they give us 60 days to pay, just throwing an average number.

John Warrillow:

Sure.

Ashok Vasudevan:

So, the pouch gets into India from Korea. India has to pay. India has to pay Korea. The Tasty Bite in India, which at that time did not own produce slowly started owning that business, had to pay in 60 days. But they don’t have the money because they’re broke. Here comes a beer company that says okay, I’ll give you enough money for working capital. So we place an order, let’s say for a dollar. I’m making up an example. Let’s say a container costs $50,000 to buy. $25,000 of that container is paid by this company, this trading company to Tasty Bite. Tasty Bite uses the $25,000 to pay its wages, buy the raw materials and pay for the packaging material. It exports it.

Ashok Vasudevan:

The export comes to the trading company. It comes to us, we have 120 days. The trading company actually has an upcharge, and it has a markup. So it makes the money on the markup because it trusts that we will pay. We have 120 days after we clear customs and the FDA. So we got to sell, and recover the money in 120 days. So, this is the way we started. I often tell people, entrepreneurs and they will raise their blood pressure before they raise their capital. It’s true because we get victims… We’ve become victims of raising capital. All you have to do is to allow other people to make money, and not think about how you make your margins. And then, life becomes a little bit easier.

Ashok Vasudevan:

So I’m not big on raising a large amount of money, and then using words like burn rate. You don’t need to burn, not in all businesses. You just need to have good relationships, and a good story.

John Warrillow:

And that helped you finance the business? Did you raise any outside capital?

Ashok Vasudevan:

We did. So when we acquired Tasty Bite, we had very little money of our own. But we did have a consulting firm that did help pay a little bit for, but we raised private equity for one half of the acquisition. The other half, we generated on our own. And because it’s Unilever and it was a friendly transaction, they benefited, we benefited. They didn’t have anything to do with this business. This is not Unilever’s core business. This was becoming our Indian business, very important for us. And so there was a goodwill between Unilever and Preferred brand, which is the company we had in Stanford. Then we had a private equity coming along with us. We had a call option, which we had built into the agreement and…

John Warrillow:

Explain for folks who don’t know what a call option is to describe what you mean by that.

Ashok Vasudevan:

A call option, so there are two kinds of options, which are opposite. A call option. is you can call… So when, let’s say this company is CDC in our case acquired 49% and we had 51%, and we bought Tasty Bite, the majority stock of tasty bite. We bought 51% of tasty bite in India, so now we own 51% of a public company. They own 49% of this holding company, and we hold 51% of the holding company. But we say that look, at the end of two years, three years, four years, what are the terms could be in the shareholders’ agreement that we have with the investors?

Ashok Vasudevan:

We said we want to have a call option. There are many terminologies here but I’m just talking about one terminology, call option, which means I want to call on the shares that you have with the company, if I can give you a certain reasonable return on investment that can… It’s called an IRR, that’s an internal rate of return off, whatever the numbers; 15%, 20%, 25%, whatever you negotiate. And you say if I can give you a 25% return, which means you invested $100. If at the end of 12 months, I can give you $125, you make 25% IRR, in which case I give you 125, you give me the shares, I have exercised my call option.

Ashok Vasudevan:

So we had a call option, which we exercised three years after we acquired the business. And in 2002, we bought the private equity. And now, we held about because it was an open tender offer in the Bombay Stock Exchange, we had 75% of the public company in India.

John Warrillow:

What was the call option? Like, what was the return that they were, the private equity group was looking to achieve?

Ashok Vasudevan:

Above 20% percent, 22%, I think [crosstalk 00:28:16].

John Warrillow:

[crosstalk 00:28:16]?

Ashok Vasudevan:

Yeah.

John Warrillow:

Okay.

Ashok Vasudevan:

Which is more than [inaudible 00:28:16].

John Warrillow:

So they held it for three years, is that what you’re saying?

Ashok Vasudevan:

Yes.

John Warrillow:

So they held for three years, so you had to give them a 22% return each year for three consecutive years? So over a three year period, so much larger than 20.

Ashok Vasudevan:

Yes. But the way it happens is you don’t give it every year because they don’t know that you’re going to call.

John Warrillow:

Sure.

Ashok Vasudevan:

[crosstalk 00:28:36] call. There are other options. There’s a put option where they can… Let’s not get into the details, but that’s getting into shadowless agreement. But at the end of the year, let’s say you invested a dollar. And if I bought you at the end of the first year, I would have had to pay you 1.22. But if I had to buy you in the second year, then I have to pay you 22% over 1.22. So it’s 1.22 times 1.22. If I buy you at the third year, if you’re trying to cube, so you’re going into 1.22. So by the time you pay, it’s almost one and 1.7 times, let’s say, give or take. So if they had invested a million dollars, we had to pay them $1.7 million. In year three, they are happy. If you can afford it, you’re happy to get that.

John Warrillow:

What was their reaction when you said, I want to call those shares and give you your money back?

Ashok Vasudevan:

I [inaudible 00:29:27] it actually because they knew where we were, where our heads were. We were much more… They knew from the beginning that we were thinking large, I mean, we were thinking differently. We were thinking global. They were focused on India, we were focus in the world. We were living in Stamford, Connecticut, they were in Bombay, though it’s a UK fun. And they were happy because at the end of the day, they’re responsible to their investors and their LPs. So they actually put Tasty Bite on their front magazine to say, hey [crosstalk 00:29:58]. It was there success story as it were.

John Warrillow:

How did you come up with the money to pay them three years after?

Ashok Vasudevan:

So by the time [inaudible 00:30:06] and we finally bought them out in 2002. So we bought, we completed the Unilever transaction. Let me go back to the daytime again. We started the company in ’94. In ’96, this company, Tasty Bite got acquired by Unilever in India. By ’98, we bought the company from Unilever in India. And in 2001 to 2002, we exercised our call option. By now, we were already in the business for almost eight years but that was a very, very difficult year. The year we decided to buy out the private equity invested in our subsidiary company. They had nothing to do the parent company. It was a difficult decision. We could have died as a business, but we decided to go ahead and do it anyway. Every once in a while with business you bet your bank, this is one of those years. The first time we did that.

John Warrillow:

Why? What was going on?

Ashok Vasudevan:

I think part of it had to do with visions. It’s very important to have people lead or who are mission aligned. And at some point in time, if you’re looking, it’s very important to know where you’re looking and where somebody is looking. And if we’re looking at natural, convenient specialty, and they’re looking at the US and Canada. By now, we were already looking at Australia, we were looking at New Zealand. We were not looking at India. But that was not… Even though with the [inaudible 00:31:37] it wasn’t a big part of our business. So we said look, if we need to take control of that business, so we don’t have to deal with, where you have a bulky company board with many people there, you spend a lot of time in managing everybody. So it becomes an issue of managing all the stakeholders. and sometimes that forces you to work on the Business much more quickly and working in the business.

Ashok Vasudevan:

And as entrepreneurs and CEOs, we always have to make a decision. When do you work on the business? When do you work in the business? In the early stages, you’ve got to work in the business, deeply involved. And so boards and governments, and complicated structures get in the way of growth or take time. And they all have to be managed. And so if you can let people make their money, meet their objectives and move on, it’s a wonderful story. And we, we think even now, I think it’s the right thing that CDC did in moving on. And I think CDC will say, we did the right thing in giving them an exit because it creates genuine wealth, it creates genuine improvement.

John Warrillow:

I hear you say CDC, and just because we’re in the depths of this pandemic, I think of the CDC in the US. Of course, we’re not telling you about that CDC.

Ashok Vasudevan:

I’m so sorry, CDC…

John Warrillow:

No. No. [crosstalk 00:33:07] with the private equity investor.

Ashok Vasudevan:

I know. Commonwealth Development Corporation is one of UK private equity firms. We used to call it Queens Money, which is the largest….

John Warrillow:

[crosstalk 00:33:16] you go.

Ashok Vasudevan:

… public Equity firm way back then in India. They were our partner, and they invested along with us and they exited in 2002. Then [crosstalk 00:33:27] …

Ashok Vasudevan:

Yeah.

John Warrillow:

Keep going.

Ashok Vasudevan:

Then we had the US company, which had 72% of the Indian company. And the Indian company, by the way, by then was no longer sick. We turned it around. We turned it around in 15 months. We just got to that one second. We did a bunch of things that we knew we had to do, and we turned. That business is very well documented. There’s even an annual re… It’s a public company. And so the 1999 annual report title was, Don’t Turn Around. And it became, I think the first company in the Indian public sector, in the public company arena to be turned around from what US would be chapter seven or even chapter 11. In India was… It was called BIFR, but it turned around. That was 15 months after we acquired the business. Then from 2002 onwards allowed us to just grow.

Ashok Vasudevan:

We then raised capital, like everybody else. We raised of friends and family around in 2003 or four, and then we raised what we call Series A, Series B in 2007. Maybe then we did a Series C in 2010. I don’t know what the dates exactly, but we raised. We had private equity coming in into the parent company, not once but twice. It was a good round for all meaning we [inaudible 00:34:57].

John Warrillow:

How much equity were you able to hold on to, you and Meera through the whole process of raising all this money?

Ashok Vasudevan:

We held on to the majority of the controlling interest through this process, but it wasn’t important because it wasn’t not only about Meera and I. And herein lies the lesson. I’ve just been looking at those questions, John, and this is very important. We had three other people who came in and joined us way back when we acquired the business from Tasty Bite. So, this is not a story about Meera and I as husband and wife working together. This is not only about the two of us holding equity. There were three other people, very driven, dedicated. We were a team, and it’s very seldom you will find a five-person team lasting 20 years in a business. We lasted the whole time.

Ashok Vasudevan:

It was a phenomenal team, extremely competent. We had three views to [inaudible 00:35:56] for the triangle experience, education and expertise. So we had… I mean, the way we say it is, we used to joke about it, we had two Harvards, two MIT and one NCA from an education…

John Warrillow:

Really?

Ashok Vasudevan:

Yeah.

John Warrillow:

Wow.

Ashok Vasudevan:

The five were exactly that. And if you look at, that’s education. And if you looked at experience, we had Unilever, PepsiCo, Goldman Sachs, a market research defining salt meats, and Britania and the Bisco. So, we had experience. And expertise included, finance, operation, agriculture, market research. So we had people who were… I mean, it was not as driven, energetic and fun. And lucky, most of them was all of them were smarter than I, was and it made life easy.

John Warrillow:

So these five individuals, you, Meera and these three others were the shareholders that started together? They were shareholders as well the other three individuals?

Ashok Vasudevan:

Yeah. And we didn’t start… they joined after a few years after we started, but yes, we were the five used to be called the ECOM, the executive committee.

John Warrillow:

Got it. And so did you… It sounds like you separated the share classes, so that the ECOM held the majority of the voting shares where you had other investors? Is that you separated up?

Ashok Vasudevan:

That’s how we separated that.

John Warrillow:

Okay, that’s helpful. A lot of people are listening to this, and are going through the worst times in their business life. They’re in the midst of being shut down again, for a second time as a result of this pandemic, all sorts of uncertainty. As you think back of the arc of Tasty Bite, what was the darkest day for you? And how did you struggle through it?

Ashok Vasudevan:

Let me answer it this way. I think of us as experts in failures. We have failed more often than we have succeeded, honestly. And the way I think about it is our graveyard is full of products that consumers rejected. And our graveyard has got more products than products in the market. So we could always think of this as a dark day, and we’ve had several moments where we thought, no, we were going to be in serious trouble. And this could have been because even simple little things like there’s a port strike. And if that container doesn’t come, you’re blown, you’re over because you have an existential crisis. When you’re small, the smallest problem can become existential. And so…

John Warrillow:

Did that actually happened to you, where you had a container not show up?

Ashok Vasudevan:

Yeah, we absolutely did happen to us and…

John Warrillow:

What happened?

Ashok Vasudevan:

Just because you may have a port strikes, so you think in your scheduling you don’t get it, so you don’t have it and you don’t have it for the next 15 days and 20 days. And then you talk to supermarkets. No, they’re not always nice to you. They don’t really care because they have to care about their customers and their shelves. You may have a perfectly legitimate story and you might call the buyer, whatever name you want to call [inaudible 00:39:37]. But the truth is, she doesn’t care and she probably shouldn’t. But you can die. So you’re groveling, or you’re pleading or you’re doing whatever you can to just survive. And sometimes your supplier doesn’t come through. Supplier goes bankrupt, which has happened to us.

Ashok Vasudevan:

So then they have devaluations, which has happened in India. I’ll give you an example, and you will understand the order of magnitude. When we acquired Tasty Bites in Indian rupee to the dollar was 23.

John Warrillow:

23 rupees equaled one [crosstalk 00:40:16].

Ashok Vasudevan:

[crosstalk 00:40:16]. And I think it moved to 34 very quickly. And today we are talking 70 plus, seven zeros. It gives you an order of magnitude of what you’re dealing with. Or the average, think about the supply chain. Today, most people or entrepreneurs are facing the scrunching of the supply chain. You’re talking about both in terms of time and in terms of distance, it has to come down. Look at our business, some chickpeas and lentils are imported from Africa, the resin is Japanese, the pouch is Korean. It’s coming into India. And now we are in England, Germany, Australia, New Zealand, Canada, US, Singapore, Malaysia. Imagine the average length that a Tasty Bite product would travel, the raw material will travel, and the number of things that can go wrong. So you can look at many dark spots giving you many dark days, and you can say, I’m going to lose my hair, which by the way I used to have a lot more hair.

John Warrillow:

If you’re watching on YouTube, you know the joke.

Ashok Vasudevan:

What is that? I have proof, in 1999 when I acquired Tasty Bite, I had hair. Not, but it is only honestly, this is, we’ve had many… That the year we bought out CDC, the private equity player, and we became that money that had to come into buy that obviously drained the finances of the business. [inaudible 00:41:50] give us a year, where we didn’t know whether we’re going to pull through in 2000, and which was a worst year for us. Again, but 911 happened. Was, we didn’t know whether we would pull through. It was a terrible time for us on many fronts.

Ashok Vasudevan:

And, of course, in the GFC, we had the same problem, we were affected like anybody else. And there have been many other instances where government regulation suddenly changed. I’ll give you one example, the GSP. The GSP is a Generalized System of Profits, and many entrepreneurs who are an international business when they buy products in the US and Canada will understand this. The GSP gives duty free imports from several countries who are part of the WTOGSP signatories. 85 countries in the world, India as one of them. India is one of the biggest beneficiaries of GSP for exports of several products, including foreign to the United States. The GSP needs to be renewed by US Congress periodically. Every once in a while, somebody comes up and they don’t want to renew, or they got other things they’re fighting about. And sure enough, we know how united Congress is.

Ashok Vasudevan:

They’ve probably forgot what the United States; there is a divided Congress in the United States but anyway. And so they forget to renew it. And they forget to renew it, suddenly duties come up. And duties can range from five percent to 15%. Now, imagine if your margins are 20% and your duties 13%, suddenly your business is in trouble. So you can have have several dark days, but you keep working. Yeah.

John Warrillow:

What did you do to deal with those, that uncertainty and the logistics that you described? I mean, as you describe it, it makes my stomach go uneasy just thinking of all the logistics. What did you… I mean, again, what was your habit that allowed you to stay in the game in these dark days? Like, did you… Was it [crosstalk 00:43:59]? Is it scotch or just Asian? Like, what was the secret?

Ashok Vasudevan:

Yeah, there is a business piece and there is a personal philosophical piece to the extent… Let me deal with the philosophy first… To the extent that we don’t get overjoyed when you see good quarterly results, you also won’t get depressed when you see a terrible quarter. Which means, we don’t let the performance of the corporation determine the feelings.

Ashok Vasudevan:

Many times, some of these emotions that we face are not emotions we choose. I mean, cold is a great example. When we feel fear, or when we feel anxiety, when we feel stress, these are not choices that we can make. Those feelings are real, but we can’t choose how we feel about those feelings. And so at some point in time if we detach ourselves and say, look, I’m not going to be popping champagne because I have a great quarter, then I should be getting drunk or thorough if I have a bad quarter that either way, I’m an alcoholic, they’re having trouble. So that’s a philosophical piece to say, look, how we live our lives has got… It’s a decision we make. We can’t make everything dependent on the results, so that’s the philosophical side.

Ashok Vasudevan:

On the business side, and certainly in the consumers, in the CPE space. And this is true for b2b space. We have a large b2b business in Tasty Bite. The margins are super critical, and you need to have margins which allows for failures, which allows for disasters, which allows for unprecedented events, unexpected events. And we’ve had so many of them, that you will constantly find these events eroding your margins. And if you did not have a base that allowed these to happen… I’ll give you a simple example, raw onions. Onions in India, with India as the second largest producer of fruits and vegetables in the world. And so there’s China, Brazil, India, US. But in India, the price of onions can go from, meaning five cents, three rupees a kilo to 100 rupees. The difference can be 30 times in a 12-month period. I mean, it’s an important raw material as is tomatoes, as is [inaudible 00:46:48]. And not meaning dairy as is oil.

Ashok Vasudevan:

And sometimes these vicissitudes can create havoc to the business if your pricing doesn’t allow you to absorb those. Raw material prices are only one part of it. Foreign exchange, imagine one day, it’s 50 rupees to the dollar, and the next three months later it is 55? It’s not small. It’s substantive, but you need to have cushion headroom. And so you need to be able to think that way before it actually happens, and not celebrate the profits you’re making because you’re marching up the business. And therefore you start spending, like you’ve actually that like it’s real money. It’s not real money. You’ve just made that margin to wait for a crisis.

John Warrillow:

It makes sense. I’d love to go to the acquisition by Mars. What 1500-employee company, you’ve got these, the five of you have created this incredible juggernaut. What triggered you to sell?

Ashok Vasudevan:

For Meera and I, we love children as long as they belong to somebody else. It’s true. And I’m sure Meera will agree in saying that. So we knew at some point in time we had to exit, and the other three were exactly of the same view. This is not a family business for us. None of their children was old enough to be able to take this business forward. In any case, I believe for entrepreneur is as important to plan an exit as it is to plan an entry. And the exit is more a journey rather than just one destination, you have to plan it. And we knew that we had other things we wanted to do. We had better business. Like I said, we got lucky. We grew this business every year for 25 years we ran this company. We grew this business every, 25 years. And we also had other interests in our lives.

Ashok Vasudevan:

You wanted to perpetuate, you want pursue those interests, and we also wanted to do what we’re doing currently. Which is, we can talk about that but we have been to cooperate. We built a company called CSAW, Center for the Spread of Affordable wellness, C-S-A-W, where we now think farmers must prosper, consumers must eat healthy, food companies must transform. And in a way, that’s the life we lead, or wanted to live in Tasty Bite. So we said it’s time to take it up, so we decided to move on. And we had a very smart…

Ashok Vasudevan:

By the way, the story is not about the five of us. It’s not about Robbie, Hans and Sohail, were the other three other than Meera and I, we had an outstanding management committee. We have depth in the business, and we have expertise across functions. Whether you pick nutrition, food processing, marketing, sales, logistics, customer service, assurance engineering research, TBRC is a jewel in our crown, the Tasty Bite Research Center.

John Warrillow:

But all five of you presumably had other interests. Again, you grew the business for 25 years, there’s presumably nothing stopping you from growing it in another 25 years. So I’d be curious, was there a, as they say, a straw that broke the camel’s back? Was there a triggering moment in time?

Ashok Vasudevan:

No. No. We had planned this exit in 2008. Let me give you a story. We had planned it in 2008 to say, we will exit in 2013. We said we will take five years to exit. And we knew we had to exit because this could not be only our life [inaudible 00:50:50]. Know the people who ran the business with multiple interests. I was already teachy, Meera was involved. We had already set up… Meera and I had set up a family foundation way back before we sold in 2013. Like I said, money was not the driver for us to start Tasty Bite. It was the consequence of our actions. It goes on the purpose of our business. Money was never the purpose of business, and we had a very strong purpose.

Ashok Vasudevan:

That our mission statement was enshrined in every new recruit who came into the company. So this was a mission-driven organization from the get go. And we knew at some point, we just had to build a very powerful, competent driven team who are committed to the mission. We used to say, we have to build a socially responsible organization that provides consumer delight. This was the mission, which still had many [inaudible 00:51:48].

John Warrillow:

Take me inside the room when you announced to your 1500 employees that you’d sold to Mars. Because on the outset as an outsider listening, being a mission-driven company, it sounds very inspiring, and at the same time selling to one of the world’s largest consumer packaged goods companies may have landed on people as being selling out, or [crosstalk 00:52:21].

Ashok Vasudevan:

[crosstalk 00:52:23].

John Warrillow:

How did you make the case to your employees that you weren’t doing that? That [crosstalk 00:52:31]…

Ashok Vasudevan:

This is a beautiful story. Like I said, the deal happened on the 2017 but I said we planned this in 2008. So there’s a story of almost 10 years, which is missing in this narrative. We didn’t say to Mars as our first [inaudible 00:52:48] this is a ball, Tasty Bite is a ball that has bounced many times. The idea was conceived within Pepsi when I was there. I came out of Pepsi, then Tasty Bite in the US was born. Unilever is a company that I was involved in at some point. Unilever had something to touch in Tasty Bite. In 2015, we actually got… We took this… Let me give a shout out to Barclays, maybe worked with Rothschild in a differently outstanding organization. We worked with Barclays.

Ashok Vasudevan:

Barclays was our banker, who took us in 2015 on a deal that we were planning to continue with exit. The exit in 2013 did not happen, even though we had a five-year plan to exit. And these things take time, which is why I said it is not a… It’s just not an end. It’s a journey. That exit actually happened in 2017, and we got a Japanese company called Kagome. An outstanding company. It’s probably one of Japan’s most respected food businesses. So Kagome bought majority of our parent company, so the five of us kind of almost became partners with the Japanese company.

Ashok Vasudevan:

So the employees in the company… By now, Tasty Bite was already a… It was a serious company [crosstalk 00:54:21]. It was successful in its own right, but small than it was. But it was through the happening place, it was a lovely company. And my favorite company by the way, I must say. And we, when we gave majority equity to Kagome, and then we spent the next 15 months trying to get them into the business and they spent time understanding how to run this place. And there are technologically very sophisticated click. We learned [inaudible 00:54:50] a lot of from them, and I suspect they learned a bit from us. And it became clear to me for about 12 months that this is not a business that we could leave to them. Or from their perspective, this is not a company that they could run successfully.

Ashok Vasudevan:

And so, a year or a year and a half after we had brought them in, and the company by the way already knew that we were working with the Japanese. So we had learned a lot of the culture, and a lot of the values, a lot of the quality. Their eyes have deep Japanese. Kagome managers have different eyes than all of us; they see things that we don’t see, so we learned a lot from them. And we only got stronger and better, but they knew they couldn’t run our business. It was very… Our business is very sophisticated. Because of this complex, I used to joke and say, we are the world’s smallest multinational way back in ’98. By 2015, we were still a multinational but Japanese… Well, Kagome was largely a Japanese company. We were dealing with multiple countries, multiple employees, and different zones and multiple businesses of different languages.

Ashok Vasudevan:

It was hard for them to quite understand how to take control. And even though we were training them to do so, and they were hoping to launch Tasty Bite in Japan, which by the way they already launched before they acquired us. So we decided that we would… We had a choice by the way, going back to this call option, the put option, drag along, tag along, these are all words that are used in the… I hate those words, by the way. But anyway, bottom line when you have partners, you want to watch the channels of agreement, especially if you’re in America. Anyway, let me not get into the politics of that.

Ashok Vasudevan:

But the bottom line is you have to do this carefully. And luckily, the values of Kagome and the values of the ECOM and the Tasty Bite were very similar; they cared about the environment, they cared about the people. And they knew they could not run this company [crosstalk 00:57:13]…

John Warrillow:

So, what do you mean?

Ashok Vasudevan:

So we decided to buy back, so we kind of rolled it back.

John Warrillow:

Call options, again? What was the structure? You did that through call options?

Ashok Vasudevan:

We had a structure to do that, and Barclays was very useful in that. So always when you don’t do an outright sale and you do a partial sale, we’ll be in touch, and that we will exit and they will come in. You’ve got to plan Murphy’s Law, if things can go wrong, they will. I often say Murphy’s Law with India and US works differently, when things can go wrong, they will twice.

John Warrillow:

So, you had a call option to buy back your shares from Kagome?

Ashok Vasudevan:

A little bit more complicated structurally. But bottom line we both knew the right thing to do was for us to run the business for them not to run the business, or for somebody else to run the business. And we didn’t want to run that for a long time because we had other things we had to do and…

John Warrillow:

How did you come up with the money to buy back the company?

Ashok Vasudevan:

No, it wasn’t hard. By that time, it wasn’t hard. And the way we had done it was, it was more structural. It wasn’t just giving money and taking money. They were still shareholders in the business, and we had agreed of how the structure would work. Then we moved to Goldman Sachs. So the shout out to the next. You ask for a bank, that I think the world of. I do think very highly of Barclays in the consumer side, I think very highly of Goldman Sachs. They did a great job for us, and we had a great relationship with them.

Ashok Vasudevan:

Then to now Kagome and the ECOM were on the same side, we were the sellers. Most of this, by the way was not being done harsh, harsh. The culture in Tasty Bite is not harsh, harsh. It’s transparent. Anybody in Tasty Bite in the world could have asked, hey, by the way, you know me. If they asked us for a salary, we probably showed some [inaudible 00:59:17]. So they wouldn’t be saying, I don’t want to declare my taxes since I am… Since I live in Washington DC in this house on Pennsylvania Avenue. I mean, just, it’s a joke, but…

John Warrillow:

Yeah. Yeah. So, okay, so Goldman’s, you hire Goldman Sachs to then sell the company. You and Kagome to sell the company, and Mars was the ultimate acquirer?

Ashok Vasudevan:

Mm-hmm (affirmative).

John Warrillow:

Back to my original question. This mission-driven company, it sounds like… Not sounds like. It was from everything I can hear, a very authentic right from you and Meera all the way to the executive committee, to all your employees, it was very much a mission. How did you even this transparent sort of culture justify that you will, selling as opposed to stay independent?

Ashok Vasudevan:

No plea question. I must tell you [inaudible 01:00:16] I mean, Mars, by the way has three parts to Mars. And I must tell you, this conversation, we’ve had internally so much. First of all, let me tell you, Mars is an amazing corporation. So if I had… And all of us, absolutely, we all come with… Even good people have biases, and I think of myself as a good person with my own share of biases. But we learned about Mars, and we always prided ourselves on our values; we cared about the environment, we really did in Tasty Bite. I mean, let me just take a little diversion there.

Ashok Vasudevan:

I’ll give you an example. We, the steam that is generated in the Tasty Bite factory is not from fuel oil. I mean, usually it’s from sugarcane briquettes. The oil that we use does not only heat it for electric power. It is heated through a reverse transmission of steam, so we have an organic farm. And the water that goes into the farm is the water that comes into the plant, gets recycled, and comes out. There is not a liter of water that is lost in the Tasty Bites system other than through evaporation. We have no real rainwater harvesting, which is done by where water table that has come up from 400 feet to 40 feet. We generate tons of vegetable waste every day that goes into a gas generating system, which powers our research center, our campus lightnings and our corporate cafeteria. So, we’ve lived this life. We’ve always been justifiably proud.

Ashok Vasudevan:

We didn’t talk about this loudly, but this was our life. And everybody in the company lives this life. This is the real truth in Tasty Bite. And when we learned about Mars and their commitment to the environment, it made this hubris that I just showed you. I feel very humble. We all, we do is nothing compared to the commitment of the Mars family, quite honestly. And so this kid, when we looked at it, Goldman took us to the world. Because Goldman Sachs, and we had… We were a good company, we were well known. The brand is not unknown in many parts. We happened to meet a large number of corporations. But what we had one advantage, we didn’t care about the valuation of the business. That is a very, very important thing. It takes the weight off our shoulder, but we didn’t care. [inaudible 01:02:56] we didn’t care.

Ashok Vasudevan:

And I won’t go into the specifics, but the deal is [inaudible 01:03:02] were scared. So, you just have to land it safely. Because we knew we had 7500 people who depended on our right decision, 1500 employees. I mean, on an average, there are five others who are dependent on those 1500 in some form or another. And so, we have to land this baby safely. And that is more important. So, we met a large number of outstanding companies. We were lucky, we met some outstanding people. It was a competitive process. It was not a random occurrence, but we… Then we met the team at Mars. We met the CEO of the Mars Food Business, and we met the management team of Mars. And it was at one meeting that turned our meeting, and ECOM was there. And this was a meeting in London, and that meeting completely changed our view. Then we said wait, we’re going to make this happen.

John Warrillow:

What did they say in that meeting that made you change your view?

Ashok Vasudevan:

We just showed us our bias. We didn’t have say it. They just told us we will ignore it without saying it that way, but they spoke about the work that they do. And just energy in the room sometimes, and entrepreneurs know this. When yours it’s almost like when you have your… I always say this by the way, I don’t have children so I don’t have this analogy and the wrong analogy. When people say, what do you think this is Tasty Bite as your baby, what do you think about selling it? And I say wait, I’m not in the business of selling my baby. Tasty Bite is our baby. I don’t sell babies. It’s true.

Ashok Vasudevan:

But when your daughter or your son does want to marry somebody, you do look at your son-in-law or your daughter-in-law a little bit different. You want to say yes because the child wants it. The more you know that this is going to work, I’d like to think that parents know that their children’s marriage is going to work. And I can’t wait [inaudible 01:05:14] that this was right for people in Tasty Bite, this was right for Tasty Bite consumers.

John Warrillow:

I guess, I’d be, I’d love to go, push you a little bit more on that meeting because people listening who might get into a meeting with a potential acquirer, you just know when it feels right is a bit nebulous. It’s hard for them to understand or take that away. What were the signs in that meeting that you were like, yep, this is going to work. This is where you’re going to land the plane?

Ashok Vasudevan:

Yeah, this is [inaudible 01:05:52]. This is not loosey goosey, let me be very specific. Uncle Ben said, I mean, not Mars foods is a big division. It’s not the largest. And among three or four divisions of Mars food, it’s probably the smallest. They have confectionery, they have pet care and they have foods. In the full business, they had a few brands that we competed with, which we respected. Seeds of Change is an organic green and rice company, ready to eat. We competed with them. We have them in our cross hairs.

Ashok Vasudevan:

In fact, we used to watch them every month, and we used to report our market share growth versus theirs. We had to beat Seeds of Change, but we respected Seeds of Change. Uncle Ben’s Rice was one of the largest prepared foods rice, and we knew them because they… I didn’t like necessarily their products in the way that they were doing it, but it was, can give us a good debt volume. And we had retorted rice before Uncle Ben’s had. But when they came in, they showed us the way. So we knew, they would be 100-pound gorilla. But we were making good progress vis a vis them.

Ashok Vasudevan:

Our products in our mind was better. And I suspect that the way we were doing it, the retort technology that I spoke about, Uncle Ben’s is an expert in that technology. We are probably not bad ourselves, and there was genuine respect. They had scale, we had innovation. And the two normally go against each other. When you innovate, you often don’t get scale. If you’re focused on scale, you forget about innovation. So here was a place where, genuinely our innovation could meet their skill. Where doe the values met? If the values didn’t meet, then the skill has no meaning. But if the values meet and they have scale, they have geographical reach and be make better quality but certainly great quality product, which they acknowledge as being great quality. Then, only good outcomes will happen.

Ashok Vasudevan:

And Uncle Ben’s today is still a brand, Tasty Bite today is still a brand, Seeds of Change is still a brand, Dog Meal is still a brand. So these brands still survive, and I’m still [inaudible 01:08:05] Tasty Bite, by the way. And they’re still a public company, and there is no longer 10 rupees, that is today 10,000 rupees [inaudible 01:08:14] 10,000.

John Warrillow:

How many offers did Goldman Sachs bring to the table? They had the one from Mars, and have [crosstalk 01:08:22].

Ashok Vasudevan:

[crosstalk 01:08:22] but I can’t tell you that. But let me say that we had a choice. We had the word, is a reasonable thing to say.

John Warrillow:

What was the range in value? And again, I’d be curious to know…

Ashok Vasudevan:

Why? Why? Why?

John Warrillow:

… Percentage, the percentage [inaudible 01:08:40] like would have been [crosstalk 01:08:42].

Ashok Vasudevan:

It’s a tricky one. I’ll pass on that, but let me just say because it gets very personal. But let me say that Mars was not ungenerous by any means. And yeah [inaudible 01:09:09] that big meaning, this was genuinely though, John not about money. This was landing Tasty Bite safely [crosstalk 01:09:17].

John Warrillow:

I love that analogy.

Ashok Vasudevan:

I can’t tell you how important that is [crosstalk 01:09:22] probably the only important thing. And I think [inaudible 01:09:27] that more than safety.

John Warrillow:

I love that analogy. It’s beautiful. And the skeptic in me says, what do you mean it’s not about valuation? I mean, there must have been some element of wanting to be paid fairly for this business [crosstalk 01:09:44] for 20 years.

Ashok Vasudevan:

[crosstalk 01:09:44] value is like beauty, John, it lies in the eyes of the beholder. We as entrepreneurs, we are legends in our own mind. That is the truth. Who cares? Just because I might say I grew this business for 25 years, we brought it from zero to one and then 125. No. I can give all these stories but the truth is, why did we start on this journey? From our perspective, philosophically, we are where we wanted to be. There’s not a bad place to be.

John Warrillow:

Were you and the other members of the ECOM, the other five of you, and did you all share this philosophy that the valuation didn’t matter?

Ashok Vasudevan:

Yeah, absolutely. If you ask [crosstalk 01:10:36]…

John Warrillow:

Including the finance guy?

Ashok Vasudevan:

Including the finance guy, who by the way that’s Goldman. And I mean, this was… And he’s doing some amazing work today. Look, this valuation doesn’t matter. Because, I mean, the truth, let’s face this. When you’re an entrepreneur, and most of us were upper middle class have more money than we could probably spend for the rest of our lives. This is not easy for many people and many cultures to understand. If they haven’t understood after COVID-19, they probably never will.

Ashok Vasudevan:

The truth is, this is not about money. This is about who we are. This isn’t about our values. This isn’t about our outcome. I’m not even talking about a legacy. I don’t care if people remember Tasty Bite, famously, this is our legacy. This is not about us. This is not about Meera’s and my legacy, or the ECOM’s legacy. We have a bunch of things we have to do that to do that involves selling the company you start, and moving on to the next. And this is not… I mean, in some sense, this is managing our purpose. So, you keep moving. You’re not a hero because you sold high or a terrible failure because you think so low. We’re just moving on to the next big thing. Hopefully, it’s because what you did are more important.

John Warrillow:

Speaking of big, what did Mars pay for Tasty Bite?

Ashok Vasudevan:

Do you wish? I wish I could say that, but enough to… The public company numbers, they’re all available. But let me give you a sense of just relative scale. At the time when we acquired from Unilever, the share price approximately was 10 rupees, the share for Tasty Bite in 1998, give or take. 1999, we turn the business around, and today the share price of tasty bites is above 11,000. I haven’t seen today. In the Bombay Stock Exchange, there are very few, and reasonably sure handful of companies who have moved from 10 to 10,000, 1000 times in 17-18 years

John Warrillow:

Isn’t that amazing?

Ashok Vasudevan:

I think it’s like I said, just…

John Warrillow:

I’m not letting you off the hook until you answer my question because I’ve asked twice now, you still dodged it both times. How did you tell your employees that you’d sold? Because again, a lot of our listeners, they get really nervous about that conversation about [crosstalk 01:13:23].

Ashok Vasudevan:

No, I had my employee. Let’s… Okay, okay. No, no, I’m not. I’m not dodging the question. In fact, I’d love, I’m glad you pinned me down. One of the very important, and this is where Mars becomes super important. One of the… Everybody talks about reps and warranties, and entrepreneurs listening to this will know, reps and warranties are conditions that companies put when they buy entrepreneurial companies. Entrepreneurs do have a choice to say, hey, do you have your own reps and warranties, or at least commitments that you expect? Do you want your employees not to be fired? Do you want certain policies of your business that you’re really proud of to be retained, or perpetuated? Do you really care about things in your own business that must absolutely last way beyond you’re gone? In which case, pick the buyer who respects that value. If that value is important to you and not important to the buyer, ignore that.

Ashok Vasudevan:

So by the time we went in to our employees, I already knew those employees were safe. If anything, the employees got a sudden chance of becoming global employees. The employees at Tasty Bite [inaudible 01:14:36] and Mars offers global opportunities for leadership, so this is not about their insecurity. This is actually about a larger potential. So you’re able to now offer a world much larger than you could have offered as an entrepreneur. As a CEO of a small company, however big you are and how as big is Mars aren’t even close. And so, this is an opportunity. In fact, it’s almost incumbent upon you, you’re responsible for providing that opportunity. So it’s not as hard a conversation as we think. Unless you think you’re going to turn your back, and all these guys are gonna get fired. No. No. No.

John Warrillow:

Big companies like Mars, they paper, legally paper their reps and warranties in bulletproof share purchase agreements. You’re signing those, and they are well documented. How did you do the reverse, in other words, get Mars to guarantee that they wouldn’t fire all your employees? Was it a handshake deal, or did you actually pay for that?

Ashok Vasudevan:

Look, I won’t get into the details, but I’ll tell you two things. One, can this become a piece of paper? I believe it can. Did we do that? I’m not going to answer that question. However, this is the question that when you understand the diligence works two ways, all we think about is the acquirer doing the diligence. We never spend money as a company being acquired doing diligence on the acquirer, because it’s just structurally made the other way around. If you really care about your business and not about your valuation, we would do that diligence. You would push for those pieces if you suspected. Or if your diligence is strong, you would raise the issues, or you would look around.

Ashok Vasudevan:

So if you really work… We were lucky in a way that… I mean, we chose Mars like Mars. I suspect like many options companies like us, Mars can buy many of them. But I think Mars bought us for a reason, and I think we chose Mars for a reason. You can call it an arranged marriage or you can call it a date, I don’t care which one it is. But the truth is, and I say this, by the way to Meera all the time, marriages maybe made in heaven, but the maintenance is here on Earth.

John Warrillow:

I like that.

Ashok Vasudevan:

So every day when you’re… And I’m still like I mentioned, I’m still the chairman of Tasty Bite. And I don’t believe that I have any values that fundamentally merges a problem with. Genuinely, that is not true. And in fact, if anything, I would say, the reverse is just as true; they care about stuff that we care about deeply. I can learn a few things, and [inaudible 01:17:54] a lot about the way they deal with it. So, we were lucky.

John Warrillow:

Before we go, tell us a little bit about CSAW, where people can find more information about that.

Ashok Vasudevan:

So CSAW, C-S-A-W, csaw.co. CSAW is an acronym called Center for the Spread of Affordable Wellness. That’s the brand, so think of it as our next gig. And CSAW has three, or it’s a three-part vision, I think of John Lennon and his song Imagine. So imagine a world where farmers prosper, consumers eat healthy and food companies transform? That’s the vision of CSAW.

Ashok Vasudevan:

We relocated from Stanford and moved to Singapore, and we’ve set up CSAW in Singapore. I mean. There are Americans now living in Singapore, and there are many Americans [inaudible 01:18:58] doesn’t feel. So we have… They’re Asian American… I think of myself as a double hyphenated Indian-American-Singapore [inaudible 01:19:08].

Ashok Vasudevan:

Anyway, so CSAW has three parts. It has the research center we call the AFRC, a Applied Food Research Center, which is kind of like the Tasty Bite Research Center, which we set up with the [inaudible 01:19:25] Research Center that is a Center for Excellence in Prepared Foods, R&D. We do a lot of work in product innovation, process innovation but in the new technologies, new processes, new ingredients so that the products must make you well. That’s AFRC, where we almost say that corporations and companies must no longer in the food business say, what’s my share of mind, share of wallet, share of stomach, share of plate, or even share of daily calories? That I consider entitlement. You don’t have the right entitlement as a food company.

Ashok Vasudevan:

We say we have an accountability as a food company, what is our share of wellness? And so AFRC focuses on that, on designing products, so it’s almost like a design studio. And we work with labs around in Singapore, which is an outstanding research technology place. So that’s one piece, and we work with labs around the world. The second is the CSAW acubator which is a, think of it as a incubator plus accelerator.

John Warrillow:

Acubator, love it.

Ashok Vasudevan:

It’s called an acubator. It’s a trademark, and it’s called a CSAW acubator. We invest in food entrepreneurs, who are dedicated to wellness. Then we have an advisory, where we’d like to think of working with governments, working with large corporates, and working with the very companies we invested in an entrepreneurial world. Governments and policy, because there’s so much changing in agriculture and in science that governments are playing catch up, if is GMO labeling important? Not important. How do you do GMO labeling? Is cell-based meat, meat or not meat? Is plant-based dairy, dairy or is it milk?

Ashok Vasudevan:

Quite a number of definition issues; plant-based protein, plant-based meats. Just a large number of issues. COVID, trade barriers, non trade barriers, taxes barriers, scientific barriers. Many issues have to be dealt with the governments, that’s a piece. And how you link forward with affordable wellness? Then we have corporates, I’ll use rethink your mission not your strategy of becoming responsible for consumers wellness, and not be just… When you got into the food industry can’t be the one that’s providing customers with the healthcare industry. The food industry has to protect the consumers, and they hold the wellness of the consumers in the palm of their hands. And that’s a fundamental realization that has to come into the food industry. And so our advisory works on, and of course entrepreneurs on their piece [inaudible 01:22:10] yeah.

John Warrillow:

I was going to say it doesn’t surprise me that CSAW is a mission-driven organization.

Ashok Vasudevan:

You don’t have to be an NGO to be a mission-driven organization. But having said that, I want to take a minute to tell you way before we sold to Mars, and a little after we got Kagome in, we actually have a family foundation in the US. It’s called the mavfoundation.org. MAV, very uncreative. It’s Meera and a Chauffeur driven foundation

John Warrillow:

For a couple of marketers, I’d expect more from you.

Ashok Vasudevan:

I know, exactly [crosstalk 01:22:47]. Once you hear about the foundation, you will know this has got nothing to do with us, mavfoundation.org. MAVF is basically, it’s a fully-funded family foundation. We don’t raise money. It’s a fully funded Family Foundation, dedicated to ending hunger and malnourishment in America in a manner that is self reliant, sustainable and healthy. And it’s mavfoundation.org. And hunger in America is not a tiny problem. It’s a humongous problem. We’re talking about 50 million Americans nearly on SNAP. SNAP is a more polite word today for food stamps.

John Warrillow:

Food stamps, yeah.

Ashok Vasudevan:

You don’t [crosstalk 01:23:29] food stamps in America anymore. It’s sophisticated. It’s called the Supplemental Nutrition Assistance Program. The name got changed a couple of years ago. And so that’s, that foundation.

Ashok Vasudevan:

I don’t think of Tasty Bite as being different from the foundation, as being different from seesaw. We don’t have to be mission-driven only because we are an NGO. We don’t have to be a process-driven only because we are a corporation. And we don’t have to only have imagination because we are an entrepreneur. We are saying, look, this triangle of having a, some mission on the one hand, some rigor and process on the other hand and imagination and risk taking on the third hand don’t have to belong to the NGO, the corporate world and the entrepreneurs. They live together. For us, Tasty Bite, the MAV Foundation and CSAW, they just live together.

John Warrillow:

Well, it’s true. It’s been an absolute pleasure to learn about your story, and hear your philosophy. Frankly, it’s been really refreshing for me. So much of our show is about valuation and juicing the negotiation, leverage and so forth. And today was just a really refreshing departure from that, and so I’m grateful for you taking me there and sharing that with us.

Ashok Vasudevan:

Thank you, John, but I love this conversation. I love your energy by the way, and I love your persistence. You have a [inaudible 01:25:01] that keeps me on message, so I love it, honestly. This is I love this conversation, so thank you so [crosstalk 01:25:08].

John Warrillow:

Well, I wish you say it’s mutual continued success. We’ll put all the links in the show notes. I wish a wonderful luck with that, with CSAW.

Ashok Vasudevan:

Thank you, John. Thank you so much.

John Warrillow:

Thanks, Ashok.

Ashok Vasudevan:

Bye-bye.

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