Elizabeth François, Writer & Designer
Facebook: Elizabeth's Note Book
Erica Barrett, the founder and CEO of Southern Culture Artisan Foods, a breakfast lifestyle brand, stepped into the Shark Tank seeking $100,000 for a 25% stake in her company.
Erica’s love for cooking started at the age of nine when she received her first cookbook from her grandmother, The Good Housekeeping Cook Book (red and white checkered hard cover). She started to experiment with recipes, honing her craft which eventually led her to become the grand prizewinner at the Lea & Perris and FoodNetwork.com cooking contest. So it was no surprise that she would be inspired one day, and that day happened when she went to pick up ingredients at the grocery store to make a breakfast of pancakes for her husband. Erica realized that something was missing from the grocery aisle: a no-fuss way to make pancakes. Ding!
Southern Culture Shortstacks Pancake and Waffle mix takes the guest work out of making delicious gourmet pancakes. Just add eggs, milk and butter, and you're ready to enjoy! The company uses all natural organic ingredients and the mix contains no powdered dairy. The mix comes in a variety of delicious and unique flavors such as banana pudding, birthday cake, bourbon salted pecan, and oatmeal raisin, and retails for $7.99.
Once Erica completed her pitch, she passed out some samples to the eager Sharks; a great tactic to make them hungry for more (as discussed in Season 5, Issue 2 of Shark Tank Class)! Between delicious bites of fresh pancakes, Kevin inquired about the sales figures. During the first 12 months, the company did $100,000 in sales (with a gross profit of $62,000) through Nordstrom, TJ Maxx, and Marshalls, who all picked up the brand by their first trade show. The company also currently sells to Whole Foods and at the William Sonoma Artisan Market. The samples must have been like manna from heaven, as the Sharks ate every last bite, and Daymond the Dog going as far as licking his plate clean. What would Miss Manners say?!
The Sharks were impressed with Erica’s profit margin: it costs under $1.50 to make, and retails for $7.99. Barbara though thought that it was a bit pricey for a 10oz container that yields 12 pancakes (or 4 large waffles), but no one seemed to agree. The Sharks were also genuinely impressed with the packaging and with what Erica had been able to accomplish in just 16 months. Her strategy for getting in to Whole Foods was a classic tale of successful entrepreneurs, calling up every single regional store and convincing the regional team leaders to take on their product. As Daymond always says, "gotta rise and grind"!
All in all, the Sharks were really wowed by this southern bell, and now it was time to either make a deal or pass. Mark was the first one out, saying that any food items that sold for more than a 7 Eleven hot dog was too much for his food portfolio. Robert was deadpan, as he pointed out a critical flaw – Erica didn't give him enough food! All kidding aside, Robert saw this as a high-end niche market and not a big business and was out as well. The came along Mr. Wonderful. He offered $100,000 for no equity, but instead for a royalty of $1.00 per unit, which drops to 50 cents per unit once the $100,000 is recouped. Kevin also had several contingencies, one being that she must work with a co-packer, because he simply didn't think it was cost effective to package the product at their commercial facilities. Robert tried to shed light on Kevin’s ridiculous offer, but Kevin pointed out that 1/3 of the dollar will be recouped when working with a co-packer. Robert disagreed and all the Sharks seem to be attacking Mr. Wonderful. Used to this, Kevin stood his grounds and pointed out that he’s not called Mr. Wonderful for nothing. Poor Erica, she looker terrified.
Then came along the good and compassionate Barbara. Barbara said shew as unable to stand the thought of Erica in business with Kevin, and reluctantly made Erica an offer of $100,000 for a 40% stake. Barbara went on to explain that Erica, who has so far has been under a lucky star, didn't really know what she was in for: stores that don’t pay, charge backs, and a slew of hurdles that almost put all her entrepreneurs out of business. Erica countered with 30% stake for $100,000, but Barbara was stoic. Erica countered again asking for 35% stake and pleaded with Barbara. Then, Mark, Daymond, and Robert joined in by chanting "Barbara, Barbara, Barbara" and egging her on until she met Erica somewhere in the middle at $100,000 for a 38% stake.
This pitch was a great example of how peer pressure can influence even a tough Shark. Barbara was pretty steadfast on her 40%, and really showed no flexibility at all until the other Sharks chanted her name and convinced her to bend just a little bit. Do you think Barbara's giving in demonstrates a weakness in her ability to stick to what she originally says and makes her bit of a pushover? Barbara is certainly a kind and caring person. But is she less firm and steadfast as the other Sharks on the panel?