How Eric Skae built a $100M pasta sauce empire: Carbone Fine Food

My guest today has spent more than 35 years building some of the biggest names in food and beverage Arizona Iced Tea, Naked Juice, Rayo's Red Sauce, Popcornopolis, and today Carbone Fine Food. But Eric Skay's career hasn't been a straight line. He's built companies, lost companies, helped sell companies, and then took.Everything he learned building one of America's biggest premium pasta sauce brands and used it to build another. Carbone Fine Food has surpassed 100 million in sales and landed on more than 30,000 shelves around the country. So today we're talking about failure, competition, scaling, and whether building one great brand teaches you how to do it again. I'm Ian Schwartzman, and this is Built Different.Eric Sky, thank you for coming to Build Different. I appreciate you for coming here today. You're very heavy in the CPG business and the restaurant business, but you seem to be the chef behind the chef. You seem to be the cook in the kitchen for the business, but

I'm not a chef. I'm a cook, right? So I'm a cook. I go, I am not a chef. I've never.Say I'm a chef.

I do not

the difference, do not understand the restaurant business.

Wait, wait.

A chef said a chef can do elegant stuff. I'll put something on a plate that tastes good. It's not gonna look good, but it'll taste good. It'll taste great. I taught myself how to cook there. I met a guy named John Bellow who founded Soby, and John would always say about a brand, it's gotta have a soul.And like there's certain, there's something about a brand that I kind of feel and I saw that with Carbone like that's, that's what I saw. If I'm traveling for the company, I'm wearing my brand. I'm wearing my logo. Like why wouldn't you, right if I'm traveling personally and I'm going with my wife somewhere, I don't, but if I'm working, you're wearing a logo. I'm wearing a logo. So yesterday I was in my Carbone jacket. It is a uniform and we should wear a uniform. Like, I, you know, we walk into a supermarket.I want them to understand like I am with Carbone. I wanna be able to talk to them. I meet a customer on a plane. That's a customer. That's a potential customer. So I talked to that person.

Where do you get theinstinct for that? Because I have the same instinct. You look at everyone like a potential fan, customer, consumer, or supporter. Everybody is. But why? But what made you, uh, from childhood, there's something that had to happen that made you go.This is like intertwined in my DNA now. It's, you know, part of me. I,

I guess like, uh, I'm not Italian, right, but I play an Italian for work and I have several times and I do it fairly well. My dad was a police officer. My, my mom was a a homemaker who taught herself to be an accountant who went out and did it. So like there was always that drive kind of in.Our households that you were gonna succeed. I mean, my mother got on a plane at 16 and at Shannon Airport, County Kerry, Ireland, and flew here and lived with an aunt she didn't know, right? So you were expected to do well in our household, but food is what brought the family together, and it did it in our house. It was every night, right? So every night you got together, you talked about what went on and during the day it was kind of a, it was an event. So I've always had a passion for food. So I'm obsessed with putting something in a jar that's better than what anybody else is putting in a jar. It's, it's like.The first year of Carbone, and I heard this, so there was a, a, a legend at Rayos when I was at Rayos that Frank Pellegrino Senior tasted every batch for the first year before it was allowed to go in a jar. So guess what I did the first year at Carbone. I tasted every single batch before it was go. I had just because you heard that at. It was pandemic. I couldn't travel out of the country. I did 100,000 miles.Miles on United without leaving the country that year and it was from Las Vegas to New Jersey drive to Central Pennsylvania where our production facility was at the time and every single batch that went into a jar I tasted and we did 187,500 cases that year. I tasted a lot of sauce, so I got in this business. I bought a van and a truckload of water and that's how I started and I got the Arizona iced tea brand.That's how Istarted.

What did, what did that teach you? The route, the distribution, what did it teach you about business across the board? Not for a drink, not for a beverage company, not for a sauce company. What did distribution teach you at a fundamental level? It's,

it's funny because I was the distributor in Orlando, Florida when no one wanted your brand. You came to me. You were the guy. I was the guy.I, I, what I learned is that there's different channels for different things. So when I pick up an Antarctica Guarana and I have 5 Brazilian restaurants and they're each doing 40 cases a week, boom, I got a market. I pick up D&G Soda and I've got 10 Jamaican stores, right? That's gonna move. I pick up Tropical Fantasy lower end. That's that, that works for the inner city. I pick up Soho Soda that works in the Peacock Hotel in Orlando, Florida, and you start kind of learning.That there's a market. There's a market for broken pencils, right? Like if you think about it, there's a market for everything, and that's what I learned very, very early on. And then I got Arizona, and all of a sudden, like if you had a, a van and would work for 80 bucks cash a day, I would load you up and you'd deliver 7-Elevens because.I called on the 200 and I, I called on the 7-Eleven region office which was 212 stores, and they authorized it. They did it and all of a sudden, and all of a sudden, no, it was, this was Arizona early on. It was Arizona's reputation, nothing to do with me.It's a lot to do with a brand. Uh, so they put it on and I had to figure out how to route 212 stores back in 1992 and like

nodigitizing, nothing. How did you do that? Was that like dispatching maps,like physical map map

maps. You, you, you would route people with maps. I mean, that's how we got around.

And so Arizona Iced tea during that time you're distributing, how many pieces of product were you?Directing without any digital assistance, any AI, any computers. What

were you 36 years ago, but I had like 6 trucks going out every day.

How muchproduct a month was moving?

Oh, it was probably,

give me an idea because this is

another 20,000 cases, give or take

a month.Yeah, 20,000 cases

a month. That's a very small business in this, in this, uh.In in this place, I mean, we're moving a lot of cases and a lot of various products, you know, it was just moved warehouses probably 3 times during that period of time, like every 6 months, so you know, but it wasn't, uh, you know, my, my philosophy then was that look, I, I, I got out of that business and made no money, but I lost no money and learned the business and went to work. I was both. I was, I, I was learning a ton.But you have to hustle to learn. Like, you, you can't learn watching people. You, you gotta go do it yourself. So, and it was funny because prior to that I was buying and selling homes. Like I was, I was real estate. I'd be, I'd be, I'd be on TV flipping now, you know, I'd, I, I'd have a TV show. That's what, that's what I was doing. I was flipping homes and in '89, the savings and loan crisis got hard to get people mortgages, became a tough business, and I found an ad in the Wall Street Journal.Which is how I got in the beverage business. I saw it was for a route, right? Someone looking for a water route, 3 counties, you know,

that was attractive coming from a real estate which is like more, uh, snap action commission-based. If I sell this big house, I get a big commission. I, you know,

I used to see the route guys here in New York. That's all I kind of understood. It, it was just you're in there, you're talking to people. You're talking to people all day long. Look, I, I learned in a week.I went from like haggling over thousands of dollars on a house to haggling over a quarter a case, you know, but you understood volume, but, but I understood volume exactly, and I understood how to build the route. I mapped it out. It was 3 counties. It, it's not that hard. It's a lot of independence in that, that market at the time, so you could start a business on independence without having a chain authorization. You could get up to 4 or 500 accounts without having it what exactly. So you were walking in, you were talking to the store owner, having that conversation.And then you have your own business and then you had to back it up with quality service. And I gotta tell you, I wasn't that good at it, right? It's like I, I became good at it, but I started, I didn't know a damn thing. I had to learn. But then you go to Arizona Iced Tea, and that's all entrepreneurial. You've got to boil things down to very simple terms so everybody understands it. So you can ask me today, what do you do at Arizona Iced Tea? And I'll tell you, we get eye level on the shelf next to.Snapple and a self-identified Arizona iced tea glide rack. We put up 3 signs in every store and we back it up with quality service. End of story, and I mispriced it at 99 cents, so I missed one thing, right? But like if you couldn't answer that, you didn't, you didn't like

you weren't part of the business.So you, so hold on, you're absorbing all this business, you're, you're building, you're going into new avenues, um.What happens with the tea company? Well show me something that give me something that was a commercial, commercially or visibly successful, but was financially a disaster.

Look, I talked to my team yesterday. I did my team meeting yesterday and I talked about the success of this brand.And in order to be successful with a brand, you need 3 things. You need a brand, right? And it's gotta have a brand. And, and sometimes a brand starts at a pro as a product and becomes a brand because of what you do to market it. Here we had a brand, right? The second thing you need, which I think in many cases is more important, this team. You need a team, right? And I had both of those with the iced tea company. Third thing you need is money.And me being as smart as I was, you know, kind of 1010 years experience in the business and being as entrepreneurial as I am, I was gonna bootstrap it, and I'm gonna do this and I don't care what anybody else says. Yeah, it was a big mistake because I put on, um, 137 distributors in 37 states. Biggest single market distributor in the world at the time was Manhattan Beer here in New York, and that was my distributor for New Leaf Iced Tea, and they tried to help me save it, but when '08 came.Getting money after that 2009, 2010, you know, here I am. I've got the distribution. I got it built. Manhattan Beer does a couple 100,000 cases their first year, right? Like this is a product for them to, I mean, to try to save me, they put in a year's worth of orders and paid me in 10 days like to try to help you to try to help me get the cash to contain, you know, give me enough cash to go out and raise more to kind of get it, but I, I built the product before I raised the cash and I wasn't doing it kind of simultaneously because I was.You know, doing a lot of it myself, which is to be an opportunity for me. Is

that an addiction like,And I don't mean this in a bad way, but like getting used to bootstrapping things and then looking at an opportunity, not taking a step back enough to go, you know what? I'm not gonna bootstrap this. This has the potential to be something enormous. Let me slow it down for a second so I could properly organize.

It's, it's, it's an opportunity, and I learned from it. Let's put it that way. It's an opportunity for me. I'm driven, uh, you know, I'm driven and I'm gonna figure it out and I'm gonna go through walls and I.You know, I kept that company going probably 2 years more than I longer than I should have, and I only owned 5% of it by that point and was still helping fund it, right? Like, I was helping fund minority, I sold it to a public company to save. I lost 3.2 million personally. I mean, that's like, and I didn't have 3.2 million. So like, you know, as a, as a friend of mine said, uh, uh, to me after I told her the story, she said.No wonder you've been ripping eyeballs out since I've met you. You know what I mean? Like I learned it wasn't gonna ever happen again, you, you know what I mean? I, yeah, I had 2, you know, 2 of my daughters, 2 of my kids were, one was in high school, one was in college at the time. They didn't see it. My 2 younger kids had to live through that, like me showing them, thank God I had a real estate background. I showed a mortgage broker how to get me a mortgage so I could refinance the house so I could save the house. So I called my father-in-law, I said, I need 3 months' worth of money.He gave me 3 months' worth of money, started a consulting business. Within 1 year, I was building. I was making more than I ever had. Within 5, I was like, wow, this is a great lifestyle business. I could do this forever. And I got the call if I wanted to run Rayos. So it was a pay cut to go to Rayos, but it was a challenge, and I saw the challenge, and I loved the brand, and I saw what I could do with it,

and itwas something sentimental to you. You understood the brand. It had, it had.Lore to

it. No, um, it had, it's exactly what it had. And like if I didn't make my own sauce at home, my, my, my 27 year old daughter, when she was 4, showed interest in cooking, and my wife and I would always try to develop our kids' talents, and my wife don't cook. I do.

And you said cooking and dinners were a big dealin your family.

Exactly. So her and I would pick a recipe a week, and we got really good at making sauce, which, so when I saw Rayo's.I was actually like, all right, it's a liquid. It goes in a jar. I had done a bunch of food products in during, you know, the consulting world, and I saw that I liked food better than beverage.

But how didyou scale something people already were in love withwith

Breo? It was so easy. I learned data very early on. I was reading Nielsen sheets on the, the big dot matrix printer, you know, you'd get the stack, and I'd be reading Nielsen I I learned.Data. All I had to do was look at the Rayo's data, and I could see where the opportunity was, and it was significant. Like I went into, I went in, I went into Kroger, great, great account, love them, but there were 3 skews down by your left shoe, you know, you couldn't see it. Like it wasn't visible. It wasn't on the shelf, and this is an eye-level business.Right. And, and you learn in beverage business that at the time I was at Arizona, 80% of decisions were made at the shelf. It's probably 65% now, right? Because people have brands. Back then it was in a very emergency, you know, beverage was a very emerging thing. It was Coke, you know, right? And Pepsi, um, with, with food, with pasta sauce, 35% of the decisions are made at the shelf. So if you don't have the right shelf position, if you don't know where you wanna be.If you don't go in and talk to your retailer about like who you're competing against, so you're sitting next to them, you're gonna struggle. So, you know, to go back to the Arizona tea thing, what do we do at Carbone? We got 7 skews of red sauce, 24 ounce on the shelf. We get 4 skews of Alfredo, we got 2 of pizza sauce. We price it at $1 more than Rayo's and we want to be on the shelf next to them. I mean, my team knows that.

What did you learn aboutUh, premium pricing and not scaring away a consumer but actually saying our product stands apart because our ingredients are better. I'm the one going to see the seedlings put in the ground. I'm the one tasting every single batch of the sauce. I know that we're.Using quality ingredients and something I heard you say is you're not an awareness guy, you're a penetration guy.

Marketers will tell you this awareness stuff and so like you have to understand like all of these metrics that I hear from marketers. I hear like my earned media value, I cut it in 3.I thought it's directionally correct, but it's not what you're telling me itis.

So how many skews do you have of the carbonesauce?

Uh, so sauce is 22 and now we have 2 chili crisps.

OK. Did you, the chili crisp I love, um, I wanted to ask you, uh, are you purposefullyHolding back the amount of skews, or are you intentionally making more skews to consume the shelves and give optionality?

Thinkabout Carbone. We're not a sauce company. You're a restaurant. We're an Italian platform brand within a supermarket. So there's an $80 billion addressable market of which sauce is $4.3 billion.So there's a long way I can that there's many places I can go. Don't know where we go next, but when you've got a sauce company that's eclipsed $100 million through the register, you know, and, and actually heading towards $200 through the register now.And you're still growing at 50% year over year. Like this year we should have finished up 59% year over year with me slowing a little. We

can,

we taste Rayos. We taste, you know, we taste our competitors, you know, uh, let's go Arabi. Well, we'll go spicy. This is, this is actually my, my favorite, and I believe our best executed sauce. Um, the spice, I, I think we hit the spice level level perfectly. It's, it's not hot. It's.Tasty perfect. It's perfect is what it is in my, in my opinion.

Now we don't have pasta, but I figured I'd, it's

fine right out of the jar. This is how you, this is, this is what I do. It's never on pasta and it's never warm.

OK.Now, can II'm gonna act like a

pro. Oh, a nice one hit right in the back, right where I want it. It's not

spicy. It's got a kick, but a beautiful kick. Did you ever have to tell Mario that something he wanted to put out on the market wasn't good enough or wasn't gonna work? Why

not? Because Mario and Rich are so precise about food and what they want, um.They, they, they, I, I

do trust them

100%. So like I, I have a really good palate, particularly with tomato. I, I mean, I can taste it. I can tell you.If it's mine or not, right? Uh, Rich Cherii is way better than me.

Where is?Carbone and fine foods going in the future. What do you envision for it? Um, you're a realist. You've, you've scaled companies. You've bought company, um, you've bought into companies. You've helped sell companies. Um, you've had to walk away. Um, I, I wanna know what you see carbone F foods, uh, evolving into with or without your participation intothe future.

So it's the next billion dollar food brand without a doubt. Like it's a Rayo's hit a billion dollars and like.When I went out, when I, when I started Rayo's, my goal was to, to make it a billion dollars dollar brand. When I started Carbone, my goal is to make this a brand that sells a billion dollars. That takes time. It's another 10 years. I, I plan on working forever. I don't, they, you know, my, my mom got forced into retirement at 83. She was employee one in my brother's company, and he sold, uh, at 70 employees, and she was the CFO until employee 30, right? That's, but.She got forced into retirement because the people who bought them, uh, had an anti-nepotism, they didn't want, so she got forced into retirement and she's still aggravated at 85. She tells me every day, Eric, I don't know what to do with my time. I'm wired that way. I will work forever, so I wanna see this. I, you know, I wanna see it through. I, yeah, I don't see myself starting another brand from scratch like that. I don't see happening, so I'd like to see this one.Through, so even if it's under some someone else is running it sells to someone, I'd wanna be involved to help shepherd it because as I think about that $80 billion addressable market, no one's gonna look at the data, no one's gonna walk in the stores and talk to the consumer.And understand what they're looking for from us. I know that. Like I, I walked here this morning. I've been, I, I, I, I, I had 3 stores on the way here.

But Eric,the, the, the, the market is so big. How do you plan on bringing carbon fine foods to a billion-dollar business with so much hands-on activity in a world that's becoming so detached? Like how do you do it?

You have to just tell yourself that you're gonna live differently than everybody else, I guess.I mean, when we launched Whole Foods, I made a goal to go to 200 Whole Foods myself in the 1st 60 days of launch. I failed. I got to 150. And now what the Whole Foods, is the perfect thing. How do you build it? How do you get through? Your front line is that person in the store.So why did I want to get to 200 stores? Because I personally handed out 20 coupons in every store for a free jar for the people working there, because who's talking about your product in the early days? People who worked there, the people who work there, who's adopting your product, who's saying this is what I like, you, you, you know what Imean?

Because a customer comes up to a person who works at the grocery mart, Hey, where's the red sauce? So where are they pointingyou?

I, I wanna say because I, I, we set a goal to get to everyone on launch, and we, we do this. I, I use.Them as an example because that was an extreme example of me saying I'm getting to a lot. I do this in every chain I launch and I tell my team to get in and coupon people, right? These are, these are your people, like grass, yeah, wherever you go, have free VIP coupons. Give a, give a jar away.It's not gonna break us and it's gonna, and the minute, the minute people you just tried it, you're gonna go back. Our, our repeat rate right now, I, I, I do, you know, I'm a data guy, right? I can't help myself. So our household penetration is growing like I've never seen in my life. We, we, we came off a 60 day sampling at a major chain.

So in every one of these grocery markets you're assembling. Yeah,

in60 days I did 6000 demos, right? Household penetration in those 60 days grew by 742,000 households. That is the best spend I could ever make. I could, it, it would probably cost me $50 million on TV

to, to, to do it that way penetration.

But, but what I know about this brand is we have a 49% repeat rate, which is world-class brand, right? You,

you just don't 49% repeat, uh, purchase rate. I buy one can, it means they half of those people will buyanother.

Exactly. And think about this. Over half of my consumers this year are new to their brand.That's how much household penetration is growing. So I've got all these, these customers that are adopting the brand. They're sticking with it. They're talking about it because we have hit that cultural relevance now and our marketing finally, it took a couple of years, right? You're

marketing

leaning into that we're leaning into that now. Like that's where we need to be. We need to be in popculture.

I, I, before you leave, I have something interesting.Um, have you ever collected cards before? Baseball, football,

sports? Baseball a long time ago when I was a kid, when I was a kid for a couple of years, uh, probably 5.

OK.I, um, I'm very big into card collecting and I recently started, uh, a business called Center Cut Cards and, uh, we're doing this with different artists and, and brands and I had Center Cut Cards make you, uh, one of two, cards for all of your work. Oh, thank you so much and that's on like a canvas and I, I just, you know, I'm the only one that has the other one, so each of us will have it. I'm gonna ask you to sign mine too. That is beautiful. Thank you. Check the back out and tell me if I was right.Uh, it is, and that's on canvas too.

So amazing. Thank you so much. I really, really appreciate this.

I feel like, you know, uh, it's not just entertainers and, and athletes that need sports cards and collectibles. What you've built over decades is gonna last forever, and I feel like this is something that

this

is,

this,this is amazing. Um, I, I, I love it. I really loveit.

I'm really glad you came on. You, you're having a big impact not only in the restaurant business but culturally. I'm sure your, your kids are proud that you're their dad. I'm sure that people are grateful that you're pushing something that's such a quality product and, um, you're really intertwined in the culture whether you, you realize it or not.

So I, I don't realize it, but thank you.

You are. Thank you for coming on Built Different.

I, I appreciate it.Pleasure so much.Really nice and

I learned a lot from you. Thank you.

Likewise, thank you, man.