Balance. Life is a balancing act. Work versus family - a balancing act. Spending time with your mates versus family - a balancing act. Healthy eating versus little cheating, driving strategic long-term success versus winning short-term battles, sugar versus carbs – a balance. Moving fast and breaking eggs versus maintaining status quo, innovation versus core focus, organic growth versus acquisitions, speed versus patience…all a balance, and we all have a different definition of it.
The truth is, there is never any right or wrong answer or definition to balance – there are just differences of perspective, opinion, judgement, but no one ever has a lock on the truth, no matter how emphatic they are on their point of view.
I once was fortunate enough to have the opportunity to launch the Kraft Brand in China in 1991. I had an apartment at the Lufthansa Plaza in Beijing which was the only place guilos (foreign devil long noses) were allowed to be. The country was just opening up, and there were no private cars - just bikes (lots of them), buses, and a few government taxi’s. On the outskirts of Beijing, the roads would just stop. There was no connection to the next town down, which created a bit of a distribution and supply chain challenge, only exacerbated by the fact that there were few if any refrigerated trucks, and only ice-block coolers at any point of sale, anywhere in the country.
Our factory was 45 minutes outside of town on the way to the Great Wall, which was another 30 or so minutes after that. My point? In the year that I lived there, despite being 30 minutes from one of the great wonders of the world, I never once went to the Great Wall. Balanced? Probably not in most people’s definition, but I was more focused on balancing the value of first mover advantage and speed to market versus the costs of greater competition 12 months later. So, the Great Wall, the Forbidden City, Summer Palace, T-Square – all went on hold.
As an aside, one of the first things we had to do (since no one would show up to work on time) was to install what we believed were the first ever time clocks. It focused every employee on a clear choice - clock in and get paid, or don’t and get sent to the farms in the western part of the country. Employees showed up after that. The next problem was they would show up and clock in, but then they would all go to their offices (these are line factory workers btw and yes, every employee had an office and every employee had a bed in their office). They’d go to their beds and sleep of their Mao Tai drunk from the night before. Mao Tai was this super harsh rice-based bazillion proof alcohol that would seep from your pores for the next three days after partaking. At about 11 a.m. the workers would go turn on a few machines and mull around the factory floor, before this deluge of visitors would come up from the city to partake in about a 10 course meal, served with Beijing Beer. Somehow every employee ate in the executive dining area. After that food coma, they’d go back to their offices, sleep that off, head back into the factory at about 4, turn on a few machines, and then load up on the buses to go home. By 4:35 the factory was deserted. So the next thing we did was dismantle 235 beds out of all the offices and shut down the executive dining. I thought the employees were going to literally kill me, except for Madame Zhou. She was a bad ass and former Red Guard (cultural cleanser) member. She was my enforcer and no one messed with her.
The Communist Party Secretary though, whose office was right next to mine (he had a bed though in his office also) was not very happy. He tried to block me in every way and at every step in the way. My point? Leadership is easy in easy times. …But as the leader, you have to make the tough choices that you believe are right. That’s your obligation and your accountability. Trying to win a popularity contest, or be liked by everyone is not leadership – that’s called ego aggrandizement. Choosing the “harder right” versus the “easier wrong” is … indeed harder – but that’s leadership. Making tough choices (knowing you are going to get personal attacks and personal bullets) – putting other’s interests first and serving them and the mission, that’s leadership and comes with the territory.
For the past few weeks we have been in total triage mode on our business at New Age – and leadership and balance has been tougher. Why? Well, the team is doing a great job and we are growing so quickly - that we are trying to keep up with demand and fund inventory…of a bigger scale, full portfolio, more complex business. 18 months ago we had 1 person in supply chain and logistics, 0 people in Marketing, 0 people in International, 0 people in foodservice and new channels and e-commerce, 0 ERP systems…and we had a low 20’s gross margin business, with >$20MM in debt. (all inherited btw, not created by us). 18 months later, we now have the business platform and infrastructure, the brands, the new products, and have the people, processes, systems, information, and culture and organizational capabilities to succeed. We have an emerging international, e-commerce, alternative, and medical channel business, and have double the distribution in traditional convenience and grocery channels fully coming on stream over the next 60 to 90 days. It is awesome …ly hard, but still awesome, and is not a short-term play.
When you are running companies, whether they be $10 billion or $10 million in size, resource allocation of time, money and people is one of your most important responsibilities/balances. Determining pace of initiatives and focus to go with that resource allocation comes next. In FM 22-100 from the US military, one of the key principles of leadership is to “employ your team in accordance with its capabilities.” I’m not sure I have ever gotten that balance right, as we are always pushing (with speed) to take advantage of windows and opportunities in the market. Those windows close – quickly – so our logic is, “in case of emergency, break glass.” Have the courage to bust through the window. Zuckerberg at Facebook said last week, “Most fast and break things.” He’s smart and reasonably successful, and I believe in this case, right.
Determining pace at New Age to continue our growth is a balance. In 2017 we built an incredible platform, and 2018 is our leverage and execution year. But to keep the machine running, you have to have fuel in the tanks, and ammunition in your weapons. This translates to having the financial flexibility to go with all your capabilities, and even as a public company, we really have not had the full stockpile of ammunition to really accelerate our growth for almost a year. Virtually every small cap company I see gets financing wrong. I see them every week with warrants, ratchets, burdensome debt, loan to own stuff, and toxic this and that. So far at New Age we have gotten it right. Emplacing the right” type of financing, with the “right” financing partners, at the “right” time, on the “right” pace is tantamount to success, but it is never easy. What constitutes right? Well, just like “balance”, everyone has a different definition, perspective, and no one has a lock on the truth. My definition of “right”, is the lowest cost of capital, with the fewest handcuffs, with a world-class partner, who is aligned to our objectives.
With that as our guide, we decided to put in an accordion credit facility with PNC bank, in our view, one of the best banks in the country. We started in January and these things take time, especially with this quality of institution, and the stage of transformation at NBEV. The credit facility was approved a few weeks ago, but then to close is some real work and is still not complete. We needed additional backstops and coverage to be able to close, so we effectuated an ATM equity facility with another world-class banking institution (that frankly had been in the works for 6 months) that provides that backstop/security if and when needed down the road.
Given all of the operations moving parts – and a Board meeting, and investor conference, and the largest trade show of the year, closing the PNC credit facility, and an annual 10K report due to the SEC…my family went off on Spring Break...without me. I burrowed into the office. Balanced? Maybe not, but making the tough choices to do what you need to do, despite the lack of popularity on the home front, is sometimes what’s required when you are “in the seat.” Making the tough choices to put in a backstop with an ATM to be able to close a debt funding facility– another tough choice, but making the tough choices to do what you need to do, despite the lack of popularity with short-term investors, is sometimes what’s required when you are “in the seat.” Leadership is easy, in easy times.
My five year-old daughter while on spring break was able to balance however and stay hydrated with one of our new products. She obviously learned that from her mother.