YETI: Ron and Ryan Seiders. How Two Brothers Turned a $400 Cooler Into a $2 Billion Brand

Starting a brand for outdoorsmen

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3:30I think we come up with about 10 solid names, and Yeti got mixed reviews. You know, for some people, it felt too cartoonish. For others, like, gross, this hairy, smelly Bigfoot, possibly. And I was way more confused than I went into it. So I just, like, gosh, I don't know if I'm making the right decision here. But I went back to the same group of 20 people, like, two weeks later, and I had one question.

4:02I said, hey, out of my list of 10 names, which ones can you remember? And all 20 people, the one constant they all could remember was Yeti. So that was all the validation I needed. Whether they liked it or not, it struck a chord, and that's Marketing 101.

4:26Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how the ambition to build a tougher and colder cooler led to Yeti, a high-end brand that does over $2 billion in sales.

4:58It's easy to assume that founders who come up with an idea for a niche market secretly have bigger ambitions. Maybe they're making a product for elite runners or mountain climbers or surfers or snowboarders. But the dream, at least we assume, is to eventually sell it to everybody. The thing is, a lot of the entrepreneurs I've had on this show don't really seem to think that way. When he started Patagonia, Yvon Chouinard wasn't trying to turn it into a global lifestyle brand. He was a mountain climber who wanted to make better gear for climbers.

5:30The founders of HOKA weren't trying to make shoes that you'd see people wearing at the airport. They wanted to make a better shoe for serious runners. And that's basically the story of Yeti. When two brothers, Roy and Ryan Cedars, started the company, they weren't thinking about tailgate parties or backyard barbecues or beachgoers. They were thinking about hunters and fishermen. Roy and Ryan were serious outdoorsmen, and they were constantly frustrated by their coolers. Most of what was available were the familiar plastic coolers made by companies like Igloo and Coleman.

6:04And they were OK for keeping things cold. But the brothers wanted something even tougher, something that could take a beating. And importantly, something you could sit or even stand on. So Roy and Ryan decided to make a better one. It was thick, incredibly durable, nearly indestructible, and it cost around $400. But that was OK, because they weren't trying to sell it to everybody. They were making it for people like them. Serious outdoorsmen who were willing to spend a lot more money for something that would last.

6:38But then something happened that they never expected. People outside the hunting and fishing world started buying Yeti coolers. They began showing up at tailgates and barbecues and beaches. The cooler even became a kind of status symbol. Today, the Yeti brand does more than $2 billion a year in sales. And it is so much bigger than anything the Cedars brothers imagined.

Growing up with an entrepreneurial father

7:04Roy and Ryan grew up in Driftwood, a small community in the Texas Hill Country, just outside of Austin. And as kids, Roy, Ryan, and their siblings were pretty much free to roam across hundreds of acres of land. You know, running up and down Onion Creek, turning over rocks, catching crawfish, bow hunting for deer, oftentimes before school. I don't think we realized how magical that was to grow up in nature like that. I really, at the time, I felt like every kid had access to the outdoors across the street from their house.

7:35So this is really the late 80s is kind of your childhood, right? When you guys are really like just kind of free range, just like you leave the house and you just be home for dinner. Yeah, that's right. It was kind of crazy. No cell phones. And we, you know, we'd come home at dark, but we were exploring and canoeing and doing all kinds of fun stuff and running around barefoot. So I know that your dad, his career was he was a middle school shop teacher. Your mom was a nurse.

8:05But I guess, and this really happened when you were either really little or right before you were born. But basically when you were little, he was a fisherman and he came up with a solution to a problem he had, which would eventually develop into a business he would start. But tell me a little bit about this thing that he created. So basically being a shop teacher, one of the semester projects was to build fishing rods. And there was always a problem with the coating that went over the thread wrap that held on the guides on the fishing rods.

8:38It just wouldn't hold up, you know. So he came up with this idea of maybe a clear, flexible epoxy. And at the time, nobody was using epoxy on fishing rods. So he, you know, contacted a chemist, came up with a brand name and a formula that he thought would work good, went to his first fish and tackle show. And it kind of really took off from there. He was able to get out of teaching and focus full time on that. At the time, he had four kids or maybe three with a fourth one on the way. And he started that company in Houston.

9:09And then when we moved up to Driftwood in 84, he built a shop out behind our house there. And that's where he ran the business as we grew up. Yeah. So basically, as long as you can remember, your dad was an entrepreneur. He was selling this. Flexcoat was the name of the company and still around today. You know, it was a small business. And it was enough to put four kids through college. And we took an annual ski trip to Colorado, piling in my parents' suburban. So, you know, my parents, they paid for things in cash along the way.

9:43They really didn't save any money. They didn't have any debt either. You know, their biggest asset was that company. And, you know, I think growing up in that company and seeing both my mom and dad kind of wear all the hats of a small business, you know, it's pretty darn educational. Tell me about your dad because I know that he was very present, like, in your life as children. Like, right, I mean, he, I'm assuming, taught you how to hunt, how to fish. He was very hands-on, both my dad and my mom.

10:17And I think our dad was kind of the ultimate teacher, just kind of showing us the way. And whether it was hunting or fishing and really anything that we were into, he was into. Like, I remember we got into skateboarding as kids and, you know, it wasn't long after that that he was building us an eight-foot vertical half-pipe ramp. But, you know, at the same time, he also kind of gave us free range to do whatever we wanted as well, you know, running around across the street from our house. All right. So, Ryan, you go off to Texas A&M.

10:51Yeah. And you studied wildlife management, which makes total sense. I mean, did you go into college thinking like you wanted to get into land conservation and that kind of work? No. I mean, I basically just wanted to graduate from college. I felt like that that was kind of the minimum acceptable thing to do, you know. And so I went to A&M, not exactly sure what I was going to do, but my entire life before that, the only thing I had done to make money was build fishing rods. I always, you know, could build fishing rods, sell them, and make extra money through middle school, high school, even college, you know.

11:25So pretty quickly after I got to A&M, I realized that, hey, you know, I think I want to try to start a fishing rod company and be a customer of my dad's, you know. So I worked with my dad for maybe two or three months to save up some money to place my first blank order of the fishing rods, a graphite blank. And then as I put those rods together and sold them, I was able to branch out and I just kind of grew my business from there. They're called Waterloo Rods.

11:56Waterloo Rods. Yeah. I thought it was a cool name. I thought it looked good. It was easy to remember. I wasn't super organized in the business. You know, I was getting by, but as far as being able to support a family or really, I never really felt like I was doing great other than kind of getting to live the lifestyle I wanted to live at the time. I read that you sold about 1,000 to 1,500 rods a year. That's right. They're about $175. And one thing I read about was that, like, one of your specialties of the rods you were selling were for grass fishermen, and I went down a rabbit hole on it, because this is like, you need a really durable rod, right?

12:35Like, this is, these are fishermen who go in pretty shallow waters. They're fishing under lily pads and plants. And so the fish can get tangled up in those plants and the rod can. And so it's got to be really strong to reel that, that bass in, right? Yeah. The guy that kind of made that style of fishing famous, his name's Terry Oldham. And he was kind of giving me the direction of the design of that rod, which you needed something lightweight, but, you know, really stiff, 80-pound test braided line. And they would drop these big weighted jigs down through the grass, the lily pads, the hydrilla.

13:07So it was a real specialized style of fishing, and with Terry's help, we had a sought-after rod that kind of helped me get started with Water League.

Building fishing rods and boats

13:18All right.

Building fishing rods and boats

13:19So, meantime, Roy, you go off to Texas Tech.

13:24And tell me a little bit about what you, like, what you thought you would do. Did you also think, like your brother, like your dad, you go start something, or did you not even necessarily have an idea of what you wanted to do? No, I knew I wanted to start my own business right after college. And like Ryan, I grew up building fishing rods, but he beat me to the punch on that. So I didn't know exactly what I wanted to do. I just knew I wanted to start my own business. The first thing that I tried was I put together this little shooting bench for siding and rifles.

13:57A portable bench that you would fold up and carry. Yeah. Yeah. And it had, like, a seat and a table, obviously, connected. It didn't have the seat. It had just this table connected. And I'd buy the saw horse at Home Depot, a foldable metal saw horse. And I'd make this little custom top for siding in your rifle. And I sold some to friends and family. And I sold some to a local sporting goods store in Austin called McBride's. But, you know, I quickly realized that this product or the market opportunity wasn't going to be enough to support a full-time business or myself.

14:33And I quickly realized I needed to pivot. Right. And, you know, our dad, Roger, he was already messing around with boats. We were getting these aluminum hulls built down in Florida, bringing them up to my dad's shop there in Driftwood and rigging them out. And these boats were specialized for the way we were fishing down. Like shallow water, right? Yeah, shallow water. Yeah. You know, chasing redfish with a fly rod. You know, the great thing about the Texas coast, there's just thousands of acres of backcountry, shallow water fishing.

15:06And, again, I learned a lot about how specialized the boat business is. And I learned how difficult the boat business was. And my dad's joke was, well, Roy, if you don't sell too many boats, you can stay in business. Meaning I was losing money on every boat I sold. Yeah, because you would buy the hull, right, the aluminum hull, you'd haul it out to back home to Texas. And then you would outfit it and put in and customize it. Do you remember, like, how much did it cost you and how much would you sell a boat for?

15:37Oh, I bet it cost, you know, everything with the motor costs over $10,000, right? Right. But I'd put a million hours into each boat. I mean, it took a long time to assemble it and put it together. And then, you know, I'd turn around and sell it for $15,000 or whatever it was. So it was a losing deal. It's interesting because, I mean, from what I understand, right, while you're basically rigging these boats and then selling them, right, you're putting a nice, you know, motor and a nice, you know, rubber floor.

16:09But you're also putting coolers in there, right, because you need a cooler in there for drinks and also to throw your fish in. And that, I guess, was – it wasn't the first time, presumably, you guys had exposure to coolers because you guys are fishermen. But it was, I guess, the first time that you sort of were using coolers in a business setting, like in a – you know, in something that you were actually selling. Yeah. Yeah, so I was putting a few coolers on the boat, two to three coolers on each boat. And we were using the coolers to keep our fish fresh and our drinks cold.

16:41But we'd also use them as seats, you know, in front of the center console or behind the center console. And occasionally we'd put one up on the bow of the boat to be used as a casting platform. To stand on top of. Yeah, you stand on top of it, and what you're doing is you're elevating yourself off the bow of the boat to get visibility as you're sight casting to these redfish. You're in such shallow water, you can actually see where the fish is. Yeah. And you're casting right in, like, right sort of in the direction that it's swimming. You literally – you're not casting until you see the fish.

17:14So with these coolers that were available to me at the time really didn't match up to the rest of the quality of the boat, right? And like you said, we grew up using coolers, you know, for all of our outdoor pursuits. But putting them on the boats has really exposed me to kind of the frustrations of ordinary coolers falling apart. When you – our daily abuse and our daily wear and tear, the hinges would break, the latches would snap. And I think this was kind of my light bulb moment for, you know, realizing that, man, these coolers are – they fall apart with little or no use.

17:52And really, they'd become a seasonal product. You use it for a season, you throw it away, you replace it, you put it on a new one. Got it. And meanwhile, Ryan, I guess you have kind of a light bulb moment as well because I guess at some point you're in Florida for a trade show and you go into like a hardware store or something and you actually see some coolers that catch your eye. Yeah, so basically I was out in Florida and I think we had a – it was Mark Caslow's Shallow Water Fishing Expo.

18:24And me and a buddy had driven out there in my dad's van and we walked into that Ace Hardware and I turned to the left and saw this big pile of coolers. And they were – I mean, the first thing I noticed about them was they were heavy duty and I'd never seen anything like it compared to the Igloos or the Colemans. And that caught my eye and I was thinking, hey, Roy needs this on his boats. It'll solve our problem of tearing up these coolers every trip almost, you know.

Discovering heavy-duty imported coolers

18:52All right, so Roy, you find out about these coolers. What struck you about them? Like what made them different? Our problem with the ordinary coolers was a durability issue. You know, we weren't real concerned with ice retention. Our frustration was way more about durability. You know, the durability around the hinges and it was roto-molded in thicker walls. And so everything about it was just beefier, meant to last, unlike ordinary coolers that would fall apart. So, you know, I saw it right away as a solution for the boats, but it was also – I recognized if we're frustrated with ordinary coolers falling apart, others were too, right?

19:31So I got a hold of the distributor that had been importing them into the U.S. And I said, hey, I think I could sell some of these coolers around Texas. Is there any chance I can get a distributor price? Like I need to be able to go out and resell to retailers. And so they set me up as a distributor for Texas, and I just – I started knocking on doors and selling them to small mom-and-pop sporting goods stores and hardware stores. You know, where I sold that shooting bench, McBride's in Austin, I walked in there and I gave them a sales pitch around this new cooler and, you know, asked for a stocking order.

20:10Trevor Burrus And these were – and the company's called Icetech, right? Mm-hmm. Trevor Burrus Thailand manufactured, but it was branded as a – Trevor Burrus As Icetech. Trevor Burrus Right. And Icetech was a U.S.-based brand or – Trevor Burrus No, it was an Australian-based brand. Trevor Burrus And just to clarify, like from what I understand, because you mentioned like roto-molding or rotational molding, because – and I think most people can picture what an igloo ice chest is like. But what made this different was the plastic was heavy-duty.

20:40It's like almost like industrial-strength plastic that was so strong. You could stand on it and you could sit on it and it just – and it was heavier. Is that a fair description? Trevor Burrus Yeah, it was heavier. It's – roto-molding is a manufacturing process where you take polyethylene, which is a plastic pellet-form resin, and you put it into a hollow mold and you begin to coat the walls. And it really piles up in the corners and makes for a real durable part. And the overall wall thickness is quite a bit larger as well.

21:13You know, I remember in the early days when a customer called up and said, well, tell me about your product, what makes it durable? I'd say, it's roto-molded. And I said, it's the same process used to make whitewater kayaks. And all of a sudden, they get that imagery of a heavy-duty, single-piece plastic part. All right. So you basically contact this company and you have a business, Outfitting Boats, so – and they were probably a small company, right? I mean, I can't imagine like – because you're a young guy, but they were perfectly fine to give you a distribution deal to sell these.

21:46Yeah, I mean, they were a small company. I think they saw an opportunity with myself and hustling in Texas to go open up doors for them. And that's what I did. So I started buying them a couple dozen units at a time. And then pretty soon that snowballed into where I was – I was importing them directly from Thailand where the manufacturing was happening. Under the brand name Icy Tech? Yes, under the brand name Icy Tech.

22:16So, Roy, it sounds like the boat outfitting business at a certain point didn't make sense any longer, right? Because it wasn't sustainable. Like it sounds like you kind of just bagged that business and just focused on selling these ice chests. Yeah, I let the boat business go pretty quick and just strictly focused on building the schooler business as a distributor. And, you know, I imagine given that your dad had a relationship with probably some mom and pop hunting and fishing stores because of his business, you had already developed some relationships, right?

22:52Presumably trying to get people to buy your boats and probably that relationship that you had helped. Well, I think maybe my dad's contacts maybe opened a few doors for us. But at the end of the day, we just knew the fishing tackle industry. And it was more about knocking on doors and giving them a product demonstration. All right. Meantime, your business, Ryan, sounds like based on what I've read, it was fine. You were selling enough to sort of sustain a life.

23:23But you kind of start to feel after, what, eight years into this that maybe it wasn't going to go anywhere beyond where it was. I mean, I had never really looked past building rods. You know, that's the only thing I'd ever really known. And one of my best customers at the time in 2005, he asked if I would consider selling Waterloo. And he had the idea of a young guy to run it down there closer to him. So he loved these rods? He loved them. He was by far my best individual customer.

23:54And I thought it was interesting that he was curious about buying the company, you know, moving it down closer to the coast. But I really didn't think much of it, you know. And I was up late one night working. I got a call from him and he said, hey, what would you sell this company for? And I kind of thought off the top of my head of what it would take for me to save up some money and what I thought was get ahead at the time. So I named a price. And as soon as I said it, he said sold. And my heart just sunk because as soon as he said sold, I was thinking, oh, I might have undershot this deal.

24:30So when you sold it, I mean, you know, again, you're 31, 32. From what I gather, it wasn't like going to set you up for life. It wasn't going to be enough money so you didn't have to work. But it was a nice, nice check. It allowed you to like take your time for, I guess, a year or so to figure things out. Right. But we're not talking about, you know, a million dollars. No, but I think in the end, when I closed, I had just under $200,000. And at the time, capital gains was like 15 percent. I pay those taxes.

25:01I went out and bought a used Rolex from my buddy and a Beretta shotgun. I was I was on cloud nine. You know what I mean? Yeah. Let's go hunting. I love it. All right. So you got your you got your Rolex and you have your shotgun and you're happy you're going hunting. OK, but, you know, you've got to you got to make a living. Yeah. You know, I had never worked for anybody else. I'd never put together a resume. I'd never had any other job that was paying me other than just helping out my dad or building fishing rods. That's it.

Joining forces in the warehouse

25:31And so January rolls around 2006. And, you know, I could see Roy was getting pretty busy distributing Icy Tech. You know, I could see he's getting stressed out. So I call him up in January when hunting season's over for me. And I said, hey, would you let me come down and help you in the warehouse? I could see you got a lot going on. He said, yeah, come on down. I'll pay you ten dollars an hour to help out. And I'm like, see you in 30 minutes. You know, I'll be there. So, Roy, you're you hire your brother because you're basically your business at this point was selling these Icy Tech coolers.

26:03Yeah, that's correct. You know, by the time Ryan sold Waterloo, I'd been distributing Icy Tech for just over two years now. And I'd built a pretty good business, you know, probably maybe as many as 100 retailers. And I was out there continuing to hustle and pick up new accounts, going to trade shows. So when Ryan showed up in January of 2006, it was a pretty good timing on, man, I could use some help in here, whether it was answering the phone or helping me in the warehouse or helping, you know, go to these trade shows.

26:37So I'm curious because, I mean, right now at this point, you are doing well as an Icy Tech, basically not working for the company, but you're getting a cut from every sale on these coolers. And like roughly, like, I mean, do you think at the end of the year, like you were pulling in, you know, over 100 grand? No, probably not that much yet. You know, maybe 50 grand, 60 grand, something like that. But you hired your brother. Yep. You were paying him. $10 an hour.

27:07Okay, nice. And he was wearing his Rolex. And we continued to open up accounts and grow the business together. But maybe at the time, it felt temporary until he figured out what he was going to do next. All right. Here's my question. You've got two clearly ambitious guys, brothers. You're selling a product for another brand, right? It's not your brand. It's another brand. And I'm thinking, was that okay? Were you starting to think, hey, I should, maybe I could do this or not, not quite?

27:39So there's a couple things going on. You know, although that original Thailand ICTEC cooler, it was a good product, but there was a lot of opportunity for improvement. As soon as you ship this cooler out into the field and you have a failure with the customer, it was a big, expensive process to have the customer ship it back to you and then replace it. And I think that's when I started losing sleep thinking about what would be the ultimate cooler if we were going to build a cooler for ourselves the way we used them.

28:10All right. There's something else I think is interesting because you are selling ICTEC branded coolers. But from what I've read, I went – they had some agreement, some distribution or licensing agreement that meant that that brand could not be sold in the U.S. starting in 2006. Yeah. So the original distributor that was bringing the ICTEC coolers into the U.S. market, he trademarked ICTEC in the U.S. So really, as soon as he departed the business, I could no longer use that ICTEC name.

28:45Which was a blessing in disguise. Yeah. Okay. So you know – you guys start talking about, hey, maybe we build our own. But before we talk about that, what was wrong? What was the issue you had with the existing coolers? Well, you know, there were some quality issues in whether it was a leaking drain plug or a bowed lid. But there was also some functional issues. You know, when you're putting these coolers on boats, you need the ability to strap them down, tie them down to the boat.

29:19And so some of the design ideas I had were putting a tie-down slot on either side of the cooler so I could run a one-inch strap through there and lock it down to the boat. That was already molded in the plastic. That's right. Molded as part of the cooler itself. Yeah. You know, rubber feet were important. And, you know, I started thinking about, okay, having rubber feet, one, it keeps it from sliding around in the bed of your truck or your boat. But it also protects the fiberglass finish on your floor of your boat. A full-frame gasket that has a better job sealing it.

29:53And hinges that were not, you know, a component that were actually molded into the roto-molded part. So that the lid and the base of the cooler, you know, are part of the hinge system. And you're running a quarter-inch stainless steel rod through there. So the design that, you know, I had in my head, it was purely functional utility. And I put a texture on the top of the lid so you could stand on it. Like a sandy, like a rough texture.

30:24Make it non-slip. And about the time Ryan showed up, I was already booking a flight to go see that Thailand factory.

Visiting factories in Asia

30:32So these were all ideas you had. But you had to figure out if you could do this. Ryan, I just want to ask, bring you in for a second, ask you, like, what do you remember talking to your brother about? Or do you remember saying, hey, we could do this. We could make this. We could create a brand. Or was it not quite fully formed yet? You know, I don't think it was quite fully formed. I would say that going over to Thailand to the ICTEC factory where the ICTEC cooler was being produced, we were hoping that they would work with us, you know, in an effort to not have failures once the cooler left our warehouse.

31:09Yeah. So when you get to Thailand, right, you go and visit this factory and you meet the guy who's running it, I guess, or somebody there. And tell me the story of what you guys, of the conversation you had. So the original intent was to work on the quality issues and try to solve for some of those problems. And I think setting foot on the factory floor, we quickly realized why we were having these problems. You know, lots of manual labor, lots of customization, lots of imperfect manufacturing process.

31:44You know, one example is I kept wondering why the bottom of our coolers had a red stain, right? As they came into the U.S., you'd flip it over and there'd be real faint red stain on the bottom. Well, they would take the plastic cooler out of a mold and they would set it on their floor, which was this dirt red clay floor. And so we were really, we were dealing with the dirt floor manufacturing. So the heat, the warm cooling, it would just absorb some of that clay.

32:15Yes, that's right. Because these were white, I guess, these coolers. Yeah, they were white. All right. And you guys didn't have, I mean, you were, you didn't have a whole lot of capital. You were ambitious, but like, you didn't have much of a choice. Like, I have to assume that if they were willing to work with you, you would have worked with them. Yeah, I think so. But we realized that this factory wasn't capable of building a design for us from the ground up. And they really didn't want to listen from what I remember, you know, when, when Roy was talking about ideas for improving the cooler.

32:48I mean, it was just kind of in one ear and out the other and just really didn't want to talk about improvement or design change and stuff like that. You know, I kind of felt like we ran into a wall there talking to those guys. But you also, you were going to go visit another factory, I guess. This is a trip to Asia. So you're going to Thailand, but then you were also going to go somewhere else. Tell me, you know, how did you even know about another place to go to? So this was the early days of searching for manufacturers online.

33:18And I found this factory in the Philippines that was making a cooler for the Australian market. And I reached out to this manufacturer in advance of our Thailand trip. And I said, hey, we're going to be over in Southeast Asia. We sell this ICTEC cooler. And do you mind if we come visit you during our trip? So we started this conversation with this supplier in the Philippines. And other than just that email communication, we really had no idea what type of factory it was, who we were dealing with.

33:51But you knew what they made. Yeah, we knew that they made a cooler. And it was a similar kind of product. Yeah, that's right. When you get, just out of curiosity, this is like a three-hour flight, I think, from Bangkok to Manila. Yeah. And who is the guy? I mean, you have a contact there you're dealing with. And who, like, what do you know? His name is Ivan Brown. He was an Australian expat living in the Philippines. And he opened up this factory to make a cooler for the Australian market. Got it. So he picks you guys up at the airport.

34:21Yes. And actually, the flight from Bangkok to Manila was more expensive than our flight from, you know, the U.S. to Bangkok. And Ryan and I are second-guessing ourselves here. Like, do we really want to go visit this factory and spend this type of money to go over there? And Ryan was like, well, why don't you just go without me? And then I was like, man, I don't want to go without you. Maybe we shouldn't go. And then basically, we talked ourselves into going, like, we're already here. We're already in Thailand. Let's just take this three-hour flight. And then we land in the Philippines.

34:55All right. So, Ryan, you guys land in the Philippines. What do you remember about your first impressions getting there? Well, so, you know, this was 100% outside of our comfort zone, you know, growing up in Driftwood, going to these countries, you know, we'd never had any reason to go to. But I remember flying in, and you're signing your paperwork as you're on the plane, your custom paperwork in big red letters, death to drug traffickers, you know. And it was just, it felt really funny to go there. Well, we roll in, having never met this guy, and, you know, Ivan, he picks us up in, like, an Azuzu Trooper-type vehicle.

35:32And it was a lot of traffic, really crowded. Well, come to find out, kind of like watering your yard where you either have an even or odd, you know, address on when you can water your yard during a drought, that's how they control traffic in Manila. And so he had the wrong license plate that day to be driving around. So as we're leaving the airport, you have these kids with machine guns trying to stop us. He's trying to bribe them to let us go. And we get a little speed built up, and one of them steps out in front of us, and Ivan just keeps on going.

36:07That guy steps out of the way, and it was a wild experience. I didn't know if we were going to end up in jail or what was going to happen. But we end up making it to his factory that was inside the old U.S. Clark Air Force Base, which is out of, I think, the name of the town there was Angeles City. And, you know, the first thing is we walked into his factory floor, and it has concrete floors. And so that's a big improvement, right? And he's an engineer by his background and started sharing some of these ideas that I had built up in my head over the years.

36:39And his machinery and equipment was definitely more advanced than the Thailand manufacturer. So you could see right away that this was going to be our path to making our own cooler. When we come back in just a moment, Roy and Ryan head down that path to a brand-new manufacturer, and it works out great until they get a horrible piece of news. Stay with us. I'm Guy Raj, and you're listening to How I Built This.

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38:58Apple Card issued by Goldman Sachs Bank USA. Salt Lake City branch. Terms and more at AppleCard.com. We get support from U.S. Bank. A question I love asking founders. What's the one decision you almost didn't make? The one that changed everything? Because it's never the obvious stuff. It's never, I decided to start a company. It's the small, boring, Tuesday afternoon decision you barely remember making until you realize it's the reason everything after it either worked or didn't.

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40:38Visit usbank.com slash business to learn more. The creditor and issuer of this card is U.S. Bank National Association, pursuant to a license from Visa USA, Inc. Some restrictions apply. We're supported by Anthropic, the team behind Claude. When I'm prepping for an interview, there's always that moment where I'm trying to turn a pile of research into an actual conversation. A founder's timeline, early decisions, big inflection points, old interviews, company background, all of it matters.

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41:42From research to strategy to the tasks that slow everything down, Claude helps you stay with the work and keep moving. For problems worth solving, get started with Claude at claude.ai slash h-i-b-t. Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2006, and after realizing that their manufacturer in Thailand doesn't want to make improvements to the IC tech,

42:16Ryan and Roy connect with a guy named Ivan who has a factory in the Philippines.

Naming the company Yeti

42:21So on that trip, we had found our future. We had found the factory that we were going to work with, and he is already building a cooler for the Australian market. We essentially white-labeled that. But at the same time, we started developing the original Yeti that was designed from the ground up with our own ideas. Okay, so to clarify, like initially, just to get your business off the ground, you figured, okay, let's just buy the off-the-shelf ones. We'll put our label on it while we actually develop this cooler we've been dreaming about.

42:55It's going to take us some time, but let's just get this going with existing inventory. That's exactly right. The minimum would be a container load, like a 20-foot container load would be the minimum order. So, yeah, it was kind of a handshake deal, and let's do it. And by this point, after visiting him, up until this point, we knew we were going to start with our own brand, but we didn't have that brand name yet. Yeah. I'm curious. How much would a container load cost at that time?

43:25I think, if I remember correctly, around $30,000, and that was probably for a 40-foot container, and that would be, you know, roughly 300 units, maybe 350 units, coolers of different sizes. And you guys must have been pretty confident you could sell those because you knew that you had sold these ICTEC coolers before, and so you knew how to bring them in. But still, $30,000, I mean, for two guys who are worried about the cost of flying from Bangkok to Manila, that's no joke. No, it's not.

43:55But I knew the demand was there in the U.S. Yeah. And we, at this point, with ICTEC, I built out a pretty good book of business, and I knew if I could get coolers in there on the retail shelves, that there would be sell-through. And the frustration that we had with the ordinary coolers falling apart, you know, that frustration was real, and we were providing something that was a solution to it. So, you guys go back to Texas. Tell me about how you started to think, because you're going to start importing these blank, you know, chests, right, coolers, without a brand name to it.

44:35Tell me a little bit about that conversation you started to have. It was literally on the flight home, Ryan and I were sitting side by side, and we started putting together a list of potential brand names. And I think going back to our dad's business and growing up in the industry, I think we had a pretty clear idea of what made a strong name or a strong brand. You know, I can remember using Sage fly rod as a kid, which was one of my dad's customers, and it's a very premium, high-end fly rod. And I love that name, Sage is named after the green stripe in the back of a rainbow trout.

45:12On the other hand, you had another very premium fly rod called G. Loomis, another one of my dad's customers. And it was named after the founder, Gary Loomis. And I remember thinking to myself as a kid how terrible that was to name a brand after a founder. And I think we had a pretty good feel for what made a strong name. And so we began to put together that list on the flight home from the Philippines. What were some of the names you were talking about? I think Sherpa made the original list.

45:44Tundra made the original list. And those are two names we used later. Do you wanted names that would evoke, like, fishing or hunting or something else? Really cold, durability. You know, Sherpa is a Himalayan mountain guide, the frozen tundra. And it has kind of a tough feel to it, tundra does. But we also felt like Toyota, you know, tundra truck. They kind of own that name. And, you know, Yeti made the original list of names. And I think right away, I liked it.

46:16I liked that it had a kind of a punchy sound. I liked that, you know, it's this Himalayan ice monster that's from a tough, cold environment. I liked that it had four letters, like sage. Looked good on a hat, you know. I felt like we probably had a winner on that list. But I get home and I start losing sleep thinking about this name, knowing how important that decision was on a brand name. So I go out to, like, 20 family and friends and I start running through these 10 names.

46:50And I'd get their feedback, which you better be careful what you ask for because, you know, you start getting their feedback. And Yeti got mixed reviews at best. You know, for some people, it felt too cartoonish. For others, like, even this, like, gross, this hairy, smelly Bigfoot, possibly. And so I got out of that informal polling, and I was way more confused than I went into it. So I just, like, gosh, I don't know if I'm making the right decision here. But what happened next was the validator.

47:22I went back to the same group of 20 people, like, two weeks later. And I had one question. And I said, hey, out of my list of 10 names, which ones can you remember? That's the only question I had. And all 20 people, they could remember maybe one or two names at best. But the one constant they all could remember was Yeti. So that was all the validation I needed. Whether they liked it or not, it struck a chord. And that's Marketing 101. Love it. And you could have – and you probably thought about Sasquatch or Bigfoot or other names, too, like that.

47:58Okay. So Yeti. This is 2006. So you land on Yeti. And how did you guys – you know, your brothers – how are you going to structure this business? So up until this point, Ryan was still on his $10 an hour salary. But, you know, we knew that we were going to partner up. And, you know, I had a decent balance sheet from distributing the IC tech coolers over the years. And Ryan's buy-in to get 49.5 percent of the company was to use his – some of his proceeds from his Waterloo sale.

48:36And so he bought the first three container loads of product that came in from the Philippines. Got it. So about 100 – Yeah, 100 grand. About 100 grand. Yeah. Yeah. And Ryan, you – I mean, it sounds like you're looking at this business because your brother was going to be the, quote, unquote, the CEO. But it sounds like you didn't really have an – it wasn't about an ego. It's like you were looking at it and you're like, well, he's been in this business longer. He's got a lot of knowledge. Yeah, I know. Roy and I had always got along well. And, you know, I was just thrilled to be a part of it.

49:07I did have, you know, this money that I could buy the first three container loads cost. Eventually, we kind of got to 50-50. And we went to a family friend that's a lawyer. And he said, hey, you don't ever want to own anything 50-50. And so it was just automatic. Like, hey, Roy, you're 50.5. I'm 49.5. I was excited as I could be, you know. Yeah. Okay. So now you're going to wait for your first container load or the first three, I guess, to come in. And how many coolers are fitting?

49:39Because these is – at this point, you're just selling one size, right? Yeah, so we're selling multiple sizes of this first-generation cooler that was called the Yeti Sherpa. And so roughly 350 units could fit on the container load. We started selling through that. And then we got another one coming on the water. So that was over a period of a few months. And you had a warehouse already because from the time you were working with ICTech? Yeah. I had a warehouse just down the street from where we grew up. So I'm thinking that first cooler that's coming in or that first container, is it just the two of you unloading cooler by cooler, stacking them up in the warehouse?

50:15Or did you start – did you bring in some people to help you or –? No, it was us. Like it would take us a full, you know, three hours to unload a container. It's like one by one by one. And were they in the container? Were they in like cardboard boxes or –? Yeah, they were already pre-packaged, ready to be shipped back out in a cardboard box. So I'm assuming you went back to the existing retailers that you had relationships with through ICTech and said, hey, we got this, you know, very similar, cooler, better new brand you guys in. Is that what you started to do?

50:46Yes, that's exactly right. We had the network of retailers that we'd built out over the years and we basically introduced them to a new, better product. So it was a natural way to introduce it and at that point we started phasing out the Thailand cooler. You start phasing it and moving entirely to the Philippines produced cooler. Did you have any issues with – because an Igloo cooler was like 30, 50 bucks, right? Or a Coleman or something like – did you have any issues with some of these stores saying, I don't know?

51:19Because just help me understand, like at that time, probably just making one cooler and then shipping it must have cost you at least 100 bucks per cooler. Yeah, that's a pretty good – I think by the time it landed in our warehouse, $100 would be about right. But yeah, part of the challenge was convincing these retailers to resell our products. And a lot of them got it right away, but there's a lot of pushback based on the pricing like, hey, my customers, they won't spend $300, $400 on a cooler.

51:53So I can't tell you how much resistance we got with this initial trying to sell these – into these retailers with a premium product.

Selling through specialty retailers

52:02But there was a pretty unique dynamic going on where when I walked into McBride's in Austin or Barings Hardware in Houston or the Tacklebox in San Antonio, which are small little sporting goods stores or hardware stores, none of those guys were selling coolers. Although every single customer that was walking through their door was a cooler user. Like if you're walking into a sporting goods store, you're a cooler user. So we weren't replacing another product on their shelves.

52:33We were giving them a cooler to sell. And the reason they weren't carrying coolers is because the big guys, the Coleman's and the Igloos, they were chasing the mass market retailer. They were chasing – Walmart, Target. Yeah. And probably at one time, those cooler companies had a decent product. But after years and years of competing for that shelf space at Walmart and Target, it was a cost of engineering exercise and it was a race to the bottom. The prices were low and the quality reflected that, which ultimately created our frustration.

53:08But also, it created a huge void in the market because a small sporting goods store with limited square footage, they can't make any money off of a $40 cooler. No, they're going to make $5. Yeah, that's right. And it's all about – these small shops, it's inventory turns, dollars generated per square foot. And so here we are. We showed up with this $300 or $400 cooler and we gave them a product to sell that was actually differentiated than what was being sold at Walmart down the road.

53:39And they could put $100 in their pocket after they sold one. In other words, you guys, it costs you about $100 to make it. You sell it to the shop for maybe $180 or $200. Okay. And then they can turn around and sell it for $300. That's exactly right. And knowing that every customer that walked into those doors was a potential buyer, all you had to do was convert a small percentage of them to make it successful. So let's talk for a moment about divide and conquer.

54:09Like, Roy, it sounds like you were out there pounding the pavement trying to convince store by store. It's a lot of work, right? One retailer at a time. Tell me a little bit about how you guys were dividing things up, right? I mean, were you – I think Roy really was more about product design and running the business. And Roy had a family at the time. He married and kids and I was not. So I could really hit the road at that time.

54:40So by the time I got there and the coolers started coming in, Yeti branded coolers, I was going to trade shows in an effort to find new retailers. Yeah, I think early on, you know, we thought that this was – this company was going to be very similar to our parents where we could handle it, maybe hire one or two, you know, employees to help us in the warehouse or answering the phone. And, you know, we quickly realized this opportunity was going to be bigger than what we grew up with. How did you – how did you realize that?

55:12Just, you know, the demand. The demand was coming. But in that, you know, obviously trade shows where you get more distribution, but it sounds like really you're focusing on Austin, San Antonio, places within a few hours drive. We were really focusing on the Gulf Coast states. You know, that's what got us into the cooler business. Like Texas, Louisiana, Alabama. Yeah, down into Florida. And you didn't have to create a use case because people were using them for putting fish or drinks. Really, you were just – all you had to say was, it's just better.

55:43You didn't have to say, here's how you can use it. All – every one of our customers had been using coolers their whole life in their outdoor pursuit. So they – I think they could recognize right away that this was a different animal, that this was a better product. And like I said, there was a frustration in the market around durability. Ice retention was kind of a secondary piece to it. And with thicker walls and a full-frame gasket, people could recognize that, oh, this thing is going to hold ice longer. And then we did start leaning into product marketing and educating the consumer on the why.

56:19And I read that somebody who I guess really helped out with that was this guy named Walt Larson who ran an advertising firm in Minneapolis. And he – I guess he was pretty well-known in the industry, right? And what – like you guys met him at a trade show? Yeah, I was at the ICAST trade show one summer, actually, that Fish and Tackle Manufacturers trade show. And Walt walked by, stopped. You know, I'm running the booth. And, you know, at the time I didn't know who he was. But he stopped and said, hey, Ryan, you know, I've walked the whole trade show.

56:51And your product is really the only one that gets me excited. He says, I think you've got a great product, but I don't think you're doing a very good job of educating the consumer of why they would pay $300 or $400 for a cooler. And I came home, told Roy about him. And I think we went on a plane up to see him the next week. And, you know, he had a compelling case for how we needed to educate the consumer. You know, when someone pays $300 or $400 for a cooler, they're going to justify it to their buddies.

57:22And it started with a tagline that he helped us create called, you know, wildly stronger, keep ice longer. Right. And then we built off of that. Yeah. And he was real big into customer testimonials and into, you know, having like kind of a pro staff. At the time, outdoor television was huge. You know, the outdoor channel, the sportsman's channel. There was one called the Outdoor Life Network. And it was kind of at its peak. But you guys didn't have a budget to advertise on those places, did you?

57:54You know, we didn't have a budget, but we, you know, we were growing the business and we were cash flow positive. And, you know. From year one, you were cash flow positive? Man, we really were. We were living off the land outside of Yeti, right? Yeah. Kathy, my wife, was teaching school. I was driving my high school pickup truck, living in a house that my parents owned out on their property in Driftwood. And so we were taking no money out of the business. And like our dad's company, you know, our dad never went to outside funding.

58:28You know, he built it from – by bootstrapping it. And that's just what we knew. We had to make this thing work by itself. It wasn't even on your horizon, the idea of, oh, let's go raise money. Like it wouldn't even have occurred to you at that time. No. No, not at all. We did end up working with a local bank to get a revolving light of credit to get us through seasonality. But never did we ever consider going out and raising money to bring in an outside investor. Okay. So it's, you know, 2006, great.

58:58First start, you've got full year, 2007. I think you guys at least doubled 2007 in sales. Yeah. I think we went from a half million to 1.2. So we doubled. So you could see momentum. And again, it's like store by store by store. And I wonder – because, Ryan, you were doing a lot of that traveling and also going to trade shows. Did you ever try to pitch one of the big stores like, you know, Cabela's or Bass?

59:29Or, I mean, did you ever – or were you just too small at that point? You know, at the time, you know, I would hang around the trade shows in hopes of getting a Bass Pro Shop or a Cabela's type buyer to stop by. But it really worked in our favor to go to these independently owned sporting goods type stores. You know, with the bigger guys, once you get these bigger customers, they start naming their terms and hitting you with all kinds of penalties and stuff like that. And so I felt like once we started selling to some of these bigger accounts, we had the power to say no when they were trying to push us around because we didn't have to have them.

1:00:08We had a really diverse retailer network that we could sell all the product we could get and all the product that we could manufacture and had the power to not get bullied by any of the bigger guys. In the meantime, Roy, you're still obsessed with this cooler design. And so were you going – like 2007, are you faxing or maybe emailing at this point design schemes back and forth to Ivan in the Philippines? No. Actually, Ryan and I ended up flying back over to the Philippines in 2007.

1:00:43And we're making a replica by hand with their mold makers. And Ivan and I are hand sketching my design ideas. We're taking it down to the factory floor. And over the two-week period, we have the cooler that's been kind of stuck in my head for the last, you know, couple years that I've been dreaming about. We have a physical part, integrated hinges, integrated anchors, you know, rubber feet, rope handles, all these things that kind of came together.

1:01:15And again, it was purely functionality driven. All right. So you guys spent a couple weeks in 2007 perfecting finally this cooler that is your design. And just out of curiosity, how did you protect it, right? It's – I mean, Ivan's making them in the Philippines. You trust him, but how do you make sure that no one's going to rip it off? Is there any way to do that at that point? Yeah, there was definitely some opportunity to apply some patents or intellectual property. But learning from our dad, once again, you know, we grew up understanding that getting a patent is an expensive process.

1:01:55But even more expensive is actually protecting it when you do have infringement. So we felt like it was kind of a waste of resources. You know, instead of playing a pre-event defense, it was more about being offensive-minded and putting money into the brand. It makes so much sense. I mean, you could chase copycats and it could bankrupt your business. And we've had brands on the show that went through that. Or you could just focus on really making a brand that people associated with quality.

1:02:25And that's what we were doing. And also, I think it's important to note that we owned our molds. Like when we built these tools, we paid for those tools. So we had ownership of that mold making that created the design. Got it. Okay. So you've got a cooler, I think, by early 2008.

Launching the Yeti Tundra

1:02:43Yeah, we're launching 2008. And it was the Yeti Tundra. And we finally got to a place where this is a cooler that we built from the ground up. And we came out with, probably at the time, six or seven different sizes. And they ranged in price from what to what? Oh, $245 to $600 or $700. Gil, I'm just curious. Because we've had, you know, over the last 10 years doing this show, we've had certain products, and certainly in cosmetics, where the founder very deliberately priced their product at a premium tier because it signals quality.

1:03:17I mean, it's great because the margins are great. But you guys weren't playing that game. Like you were literally pricing it because of the cost to manufacture it, right? Yeah, our pricing exercise was purely driven on what do we need to price it at to make money, right, today. It wasn't like, hey, let's appeal to the psychology of people. No, no. It's like if we're going to buy a cooler for $100, we're going to have to sell it for $300 because $100 is going to the retailer, and then $100 is going to, you know, us.

1:03:52And all of your business at this point is not direct-to-consumer. It's through retail channels. You're wholesalers. The majority of it is through our specialty retail channels. Now, we would sell direct-to-consumer if they called. Or maybe you had a website. I'm sure you had a website by that point. We had a website, but it just had our phone number on it. Okay. So if they called, we were going to sell them. But we weren't going on our way – out of our way to sell direct-to-consumer. Okay. So you guys launched this Tundra, and it really takes off.

1:04:24I read that, like, within a few months or maybe weeks, like, you're bringing a container a week? Yeah, that sounds about right. You know, this is 2008. We're hiring a lot of folks to come in to help customer service, to warehouse work, to, you know, everything in between. And with Ivan and this Philippine factory, we found the perfect partner to help get Yeti off the ground. All right. So everything's going great. Yep. September 23rd, 2008, you tried reaching Ivan, and you can't get a hold of him.

1:04:59Yeah, so I send Ivan an email, and he didn't respond, which I thought was a little bit unusual, but I didn't think much of it. So I call him that evening, which would have been his next morning. And I get a hold of his wife, and that's when we found out that Ivan had tragically passed away. And on the phone, she says, he's done. Yeah. I don't remember a whole lot about the phone call.

1:05:32I just remember feeling this gut punch.

Overcoming a tragic loss

1:05:35And I just, you know, telling her, you know, sorry for her loss. And, you know, I, it was a pretty big shock to the system.

1:05:49I know this is a tough, tough time for you guys because he was a friend, and tragically he was killed in the Philippines. What did that mean? And, I mean, aside from the, just the personal loss, I did, I mean, he was running the factory. Was it going to affect inventory? I mean, you were, you were depending on a container coming in a week. Yeah. So I, I remember I got off the phone call with his wife, and I called Ryan.

1:06:22And I shared the news with him, and, you know, I don't, I didn't, it was, it was a big personal loss. So first and foremost, you know, Ivan was more than a business partner. We'd travel over to the Philippines to visit the factory. He would come over to the U.S. and attend trade shows with us. So we had really developed a friendship over those few years that we knew him. And, and I don't think I slept at all that night, and, and, like I said, this is 2008.

1:06:56We're going from $1 million to $3 million in sales. I think we have, you know, probably six or seven full-time employees. And I remember Ryan and I went into the office the next morning, and we told the small team that we had about what had happened to Ivan. And I think we, we told him that we're going to make the most of it, but it doesn't look good. And, and there's a good chance that y'all need to go ahead and start looking for your next job opportunity. Yeah. Because we really felt like without Ivan's leadership, this factory was not capable of running without him.

1:07:32I'm connecting the dots here. You're thinking our business is done? Yeah. We're thinking it's done. When we come back in just a moment, how Ryan and Roy slowly piece their business back together and how they start to market Yeti using bears, real grizzly bears. Stay with us. I'm Guy Raz, and you're listening to How I Built This. When I pull up to a gas pump to fill my car, I'm not thinking about chemistry or engineering.

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1:10:14Hey, welcome back to How I Built This. I'm Guy Raz. So it's the fall of 2008, and Ryan and Roy are reeling from the news that their manufacturing partner, Ivan, has been murdered in the Philippines. The details aren't clear, but what is clear is that the brothers can no longer work with Ivan's factory. So they decide to do something unexpected. The first thing we did was we sent out a price increase to our retailers.

1:10:47And we probably had 100, maybe 150 retailers at the time. But we felt like if this was going to be our last inventory, we were going to liquidate a higher margin. To basically to maximize cash. Maximize cash, perhaps slow things down a little bit. While you're trying to figure out. That's right. So the idea was, let's just raise the price. It might piss some people off, but it'll slow down sales for now, and then we will have time. And just to clarify, the reason why you couldn't rely on the factory in the Philippines at this point was because, from what I understand,

1:11:23there was a dispute between some folks involved in the factory over who was going to run it. And so manufacturing came to a halt. They were not making anything there for a while. The factory was shut down. And all your molds were there. That's right. But long term, no matter what, even if the factory got back up and running, we really had, you know, a lack of confidence that the factory could continue to operate without Ivan's leadership. So as we kind of try to get the lay of the land and try to figure out next steps, we sent out that price increase.

1:11:59And it was a meaningful price increase, maybe 15%, where it took a cooler that retailed for $295 and pushed it up to $350, which was a meaningful barrier to when you jump that $300 barrier and go to $350. Like, Yeti was already had a reputation of they're durable, they're well insulated, but damn, they're expensive. And so I was bracing myself, sending out that email, and just like, okay, here it comes, Ryan. Let's get ready for all the negative feedback from our retailers.

1:12:32And really, it was crickets. None of the retailers called up. We blamed that price increase on a cost of raw materials increase, which was total bullshit, but we had to tell them something. And what was happening with our retailers is the demand continued to come in their doors, and people were continuing to buy coolers. And they were selling coolers maybe one or two a week, which was really good numbers for, you know, a small retailer like that. And their margin dollar expanded.

1:13:03You know, with that price increase, they were making more money. Meantime, how were you trying to frantically get your molds back from the Philippines? No, we were trying to get them to open back up. And like you said, there was a dispute going on. But we also, the second thing we did that same week is we started identifying potential roto-molders that could build our product for us. And this time, we're going to focus on the U.S. Okay. And, you know, there's a big industry, especially in the Midwest, with roto-molding.

1:13:38Especially for auto manufacturing, for parts. Yeah, it's farm equipment. It's water tanks. There's very little consumer products other than maybe kayaks. But we started booking flights to go see them. And we wanted to focus on the U.S. because, one, you know, Ivan getting killed was a really big scare for us. And the last thing we wanted to do is go back over to Asia. And then, two, we'd be shedding that overseas freight expense from the shipping containers, which was on a large cubic footprint, like a cooler, was a pretty meaningful piece of the cost of the goods.

1:14:15And then we'd be decreasing our turn times and lead times, which would help with our cash cycle. So, we had a feeling that the U.S. could be competitive, although that we'd definitely be paying a premium for labor. And Ryan and I show up to this factory in Iowa. And the first thing they asked us, well, can you share us your CAD files with us? Well, I think at the time, I didn't even know what a CAD file was. You know, we were making these molds. On paper.

1:14:45Yes. And then you were – and you didn't have a computer model of it. No, no. We were making these replicas by hand the old school way. So, I began to work with one of their engineers to start putting this Tundra into a digital format for the first time. So, it wasn't long before that Iowa factory, we had this kind of this next generation design. And then they also introduced us to these really high-end Italian-made molds.

1:15:16And the fit and finish of the product was just superior to these sandcast molds that we were making in the Philippines. Meanwhile, back over in the Philippines, that factory got up and running again. It's back online. It's back online. And we took everything we learned in the U.S. and we took that technology and we brought it to the Philippines. We started gaining more and more confidence that this Philippine factory could run without Ivan's leadership.

1:15:46And it wasn't long before the Philippine factory was making this next generation design as well. So, no, as tragic and like, oh, shit moment as this was, we came out the other end of it 18 months later just like a much stronger, dual-sourced, better product, financially healthier because of that price increase. But it was a nightmare of an 18-month period. Oh, it was a nightmare. Okay, so one of the things that I'm curious about is marketing.

Marketing through durability tests

1:16:20And we talked a little bit about this with Walter Larson who came aboard. And I saw that already in 2009, early 2009, you created a YouTube channel, which is – this is early YouTube. I mean this is not – this is still pretty early days on YouTube when people still thought of it as cats, cats on skateboards. But you put out a YouTube – do you remember what the thinking was behind that? Because, again, you know, you're still – you're growing, but you don't have a massive budget for advertising. And what did you think you were going to do with YouTube at that time?

1:16:51Well, you know, I felt like we could create some really short videos talking about the value proposition of Yeti. And I had a high school buddy that owned a camera and some audio equipment. And then we started getting into some, you know, funner videos of my friend, the same guy that owned the camera, found this bouncer down on 6th Street here in Austin and hired him to come do this video where it's talking about the difference between an igloo cooler and a Yeti.

1:17:25And it's this, you know, 500-pound man versus, you know, a Yeti. It shows him tearing up an igloo, right, slamming it on the ground, stepping on it, hinges breaking, lid caving in. And then he tries to do the same thing to a Yeti tundra, and he's throwing it off cliffs. He's jumping up and down on it. And just there's no better way to share a durability story than that kind of funny content. The one that I think anyone who knows about your YouTube channel may know is a very – one that I think probably just transformed this whole strategy, which was you had a video of a bear trying to open a Yeti cooler that was packed with peanut butter and fish, fresh fish.

1:18:06Yeah. And it's an amazing video. Anybody listening can find it because, spoiler alert, the bear cannot open it. They cannot open the Yeti cooler, which is – I mean, man, what a great way to explain how good this thing is. If I remember right, there was an interagency grizzly bear committee, and they actually contacted us and said, hey, we think that your cooler might be able to get certified as a bear-resistant container. So all these places that require bear-resistant containers for camping, you have to have this certification on the container where you're storing your food.

1:18:43And so we sent out our smallest cooler out there, and then they throw it in there with the grizzly bears that they have at this grizzly bear and wolf research center. And if it can stay out there for two hours without the bear being able to get into it, they'll give you the certification. And it just spoke to the durability of the cooler. I mean – It's so cool because you open it up. I mean, even today, it says certified bear-resistant. And even if you're not going to be anywhere near a bear, it's just – you know that it's – Oh, I got a cooler that can withstand a bear attack.

1:19:16Amazing. But even at this point, you're not yet on the radar of the big guys, right? You're still too small because I kept thinking like, where are the copycats? When are they going to come in, right? I kept looking over my shoulder thinking, man, someone's going to figure us out. You know, I felt like someone that was better capitalized, more resources, engineers, whatever, were going to come in and outdo us, out – you know, figure out something that was better than us. So, yeah, I think we were, you know, running as fast as we could to fill that shelf space at the specialty retailers because that's where the void was in the market.

1:19:56And I think in 2009 and 10 is when we really – there was a tipping point, and that is when we started getting phone calls from, you know, Pennsylvania and Oregon and Montana. And these were retailers calling us up and saying, hey, I've had three customers over the last two weeks come in and ask for your product. I guess I need to start reselling them. So, we were literally answering the phone and setting up retailers 10 a day.

1:20:27You know, one of the things that – I mean, I guess in the mid-2010s, there were so-called cooler wars where you had a bunch of different clones and other brands trying to get into this space. But I guess around 2010, 11, you start to see some brands explore this space. Coleman got into it. Pelican, which makes cases for cameras, starting to make kind of Yeti-style coolers. What do you remember first starting to see?

1:20:59Because it's both a validation, but it's also scary, right? Because you're like, uh-oh. Oh, I think there was some concern. I think we joked about someone coming out with the Yeti killer, you know, if I remember right. As you know, every healthy – you know, you need some type of competitive landscape. And I think everyone that came into the market that seemed like all at one time, they were all fighting it out for second place. Yeah. And we felt like we had nailed the product and that it was going to be hard to improve on it, which it was.

1:21:34Yeah. So, all right. So, I imagine now that, you know, once you had $20 million in sales in a year, you're starting to get attention, capture some interest from investors. And at this point, you had not taken on any money. This was self-financed. And indeed, by the middle of 2012, if it was me in your situation, I would have done the same thing because I would have thought, okay, we've been on this journey for six years.

1:22:13There are a lot of big players. There are a lot of big players coming into this space. We're not as well capitalized. Like, we do need some institutional backing if we're going to compete. So, maybe I'll sell, you know, a chunk of my ownership or most of it and take some money off now and work with this better capitalized group to build out our business. So, yeah, in many ways, that's exactly right. I think we looked up in 2011 and Ryan and I had not taken a dime out of the company or very little, minimal amount to live off of.

1:22:51So, we had zero wealth to speak of outside of Yeti. You know, again, I was driving my high school pickup truck, living in, you know, a house that my parents owned out on their property. And we had some meaningful scares along the way, including the loss of Ivan. Yeah. And we had, you know, competition coming. You know, I think I probably lost more sleep thinking about what if, what if, you know, what if there's a product liability lawsuit? What if there's a, you know, volcano that goes off in the Philippines, which is a real thing.

1:23:22And so, having all your eggs in one basket and bootstrapping this from day one, you know, it was time to diversify ourselves personally. So, mid-2011, we start running a process of taking Yeti to market, which I had, we had no idea what that looked like. But as we kind of narrowed it down to a handful of potential buyers, we were really just looking for a liquidity event to take some chips off the table, but also a partner that could help us navigate the next stage of growth.

1:23:59Yeah, at this point, I think it's, it was the reported amount was like close to $70 million for about a two-thirds, I don't know if that's exactly accurate, but that's, that's what's been reported. But if that is accurate, it's pretty good. You know, you guys are going to walk away with a nice amount of money, which will enable both of you to feel financially secure for life. But you still get to keep a significant percent of the business, I think, roughly 10% each, right? Is that, is that about right?

1:24:30Yeah, that's about right. You know, I can't remember the exact, you know, after-tax take-home, but that's, you know, in the end, it was a life-changing event. When those wires crossed into our bank account, I think I probably slept better that night than I had in the last six years. I mean, Ryan, this is better than the, than the Beretta shotgun, the three grand, $3,000 Rolex that you got from that. Yeah, no, it was a lot better. And, and it was a fun, that was a fun process to be a part of, to go to market, to the private equity and have the interest that we did.

1:25:05And pretty soon you're right back in it and you're excited about the, the future of Yeti, you know. Did you, I mean, so up until this point, you were a cooler brand, right? You're making, you're known for coolers. But now you've got Cortex behind you and the product line is going to expand. I think within the first few years, you bring, you introduce the soft bag, the soft cooler bag, and then the drinkware, which from what I read initially, some people on the board thought that might be a distraction.

1:25:38That, that really your cooler business and getting into the insulated cups, coffee cups and whatever was, that's not, was not the business for you guys to get into. Yeah. So to kind of set the stage, Yeti grew to a hundred million in sales just on hard coolers alone.

Expanding into drinkware and stepping down

1:25:58Wow. That's what, you know, that's. This is by, I think this is by 2013. Yeah, that's right. And up until that point, there was still runway in the, in the hard cooler market, but kind of the, the big knock on us during the sales process is that we were a one product company. And the, the obvious extension to us was soft coolers. You know, when I walked into target, the same dynamic existed in soft coolers as it did with hard coolers. They've been commoditized. They would leak, they would fall apart.

1:26:28And so you could see the market opportunity was big. And, you know, by that time we had built out a good team of engineers and designers. And then Ryan came over to my desk one day and he put a vacuum insulated bottle on my desk. And he said, we need to do something in this space. And I think it was a clean canteen. Yeah. Ryan, what was your, what's your, what do you remember about that? Oh, basically I had a, one of our dealers that was real successful with the hard coolers. He was a gear guy like me and he, he sent me a vacuum insulated bottle and I just took it home, put ice in it, drank water out of it.

1:27:06And the next day there was still ice and I'm like, this thing's amazing. And vacuum insulation had been around forever with a bunch of different brands. But I took that bottle in and threw it on Roy's desk and say, Hey, we need to look at this. And then a month later, Roy shows up at one of our monthly operations meetings with a 30 ounce cup and a 20 ounce cup. He called it a Yeti Rambler. And so I, I didn't have a vision to turn it into a drinking cup, but I just thought that the vacuum insulation was cool. And I let Roy take it from there.

1:27:38After getting Cortex Blessing, it was a real short putt on getting it to market and standing up the supply chain. It wasn't long after that, that we introduced these two sizes, the 20 ounce and the 30 ounce, no colorways, just stainless steel with a clear plastic lid. And like we caught lightning in a bottle. And for the first time, Yeti had a product that had mass appeal. It wasn't just our hardcore outdoorsmen that were users. We were selling them to soccer moms. And it was, it was this affordable luxury, you know, that although not everyone can afford a three or $400 cooler, they could afford a $30 cup.

1:28:14And you had already that double walled water bottle market was out there, Hydro Flask Clean Canteen, but nobody was thinking about a coffee mug or a cup, a tumbler. Yeah. Just so happens a real simple cup design, that market opportunity is so much bigger than, than bottles. Right. And soft coolers came into the market at about that same time, you know, I think they were about a month apart, but it was drinkware that really changed the trajectory of Yeti.

1:28:48And, and we went from a hundred million to 400 million. That's amazing. In a matter of 18 months. 18 months. In 18 months. And that was highly, highly supply constrained. We could not keep up with demand and we couldn't even keep up with the cooler demand because the brand awareness, we're selling so many cups. Brand awareness was exploding. So drinkware turned into our half of our business basically overnight, but it was elevating the entire brand in all of our products. I mean, it's an amazing story because it's a, it's a completely new product line.

1:29:21I know that by 2015, right now, that's almost, it's about nine years in, you stepped down as CEO and Ryan, you stepped down as president. I imagine, you know, both of you guys now, you know, we have had founders in the show who had private equity come in and got bought out and are still with the business 20 years later because they just lived and breathed it. But it sounds like both of you guys had felt like it was time you wanted to move on.

1:29:53Tell me, tell me that you're thinking behind that first, Ryan, why did you want to step down? I felt like we had worked, put in a lot of time, you know, during the years of 2006 to 2012. And, and I didn't really want to be pushed anymore. Roy was good at pushing me, getting me to work harder and, and, and really kind of seize this opportunity up. And, you know, once we had some financial security, I was ready to do more hunting and fishing and family things.

1:30:24It wasn't like, you weren't like, I'm going to start my next business. And I'm going to, I love that. You were like, I want to do more hunting, fishing and hang out with my family. Yeah. And I still wanted to be involved in Yeti, but more at my own pace. And Roy and I are still employees of Yeti today. But I, you know, I haven't been into the office in years. And you had a young family. I think you had gotten married around, went around 2012. 2011. 11, okay. And then 2012 had our first kid.

1:30:54And, and so I was, you know, looking for a break and looking to, you know, I wasn't, didn't want to come into the office and grind it out. And Roy, you had already had had, you had kids by the time you guys launched Yeti in 2006. So your kids had only really known you working and grinding at Yeti. Was it similar for you or that you wanted more time with your kids and to just hang and, or be a dad full time? Or did you, were you already thinking, all right, I'm going to launch my next business and start all over again? No, I, so the irony of, of things was, um, the outdoors is what brought us to Yeti in the first place.

1:31:33But in many ways, it took us away from the outdoors as well, because we didn't have time for it. You know, we, we didn't have time to go spend time on the water or, you know, annual elk hunt or tarpon fishing trip. And I might be home with the family, but I wasn't being a good dad. I wasn't present. You know, my mind was on Yeti. And, you know, what we were doing was not sustainable. And I think we recognize that. And, you know, today, uh, I get to come in and have fun when I want to.

1:32:04Yeah. And have, it's a creative outlet. Um, when you guys think about this journey you took, right, you know, I mean, even just falling into this cooler business in a sense, Roy, because of, of outfitting boats. Right. And then that, it could have been rubber mats on the boats that became the thing. Right. It could have been ropes. It could have been the, the, the engines on those fishing boats. Um, it was the coolers. How much of, of, of where you got to and, and how this journey kind of went, went.

1:32:35What do you attribute to the, the work that you put in, the grind, which is a lot. And how much do you think had to do with luck and fortune and just the stars aligning? Man, the, the stars definitely aligned and, and, and you can see these stepping stones growing up in the outdoors with our parents and growing up in our dad's business and kind of getting, you know, the playbook of a small business and then finding the right people. And, and, and whether it was Walt or in, in, in even a door closing on us, like the loss of Ivan, but another door would open, you know, so timing was everything.

1:33:11I would also say we were willing to kind of put ourselves out there and show up in the, in the Philippines when we were, you know, in our twenties. And we put ourselves in a position to kind of have this luck, right. And even the luck of being born in the United States of America. And it's a real privilege to be able to kind of choose your own path and do whatever you want compared to what I've seen in other places I've been, you know. Gil, it's interesting because, I mean, your dad obviously was a model, right.

1:33:43With, with, with, with a flex coat and it sounds like when you guys started Yeti, like that was sort of your vision. Like it was going to be a nice lifestyle business and, but there was no sort of like grand plan to turn this into an international brand. I know. I would say where we got lucky was picking an industry or picking a product category that could spill outside of the fish and tackle industry. Yeah, I think we thought we were doing something like our parents, right.

1:34:15And that's, that was the goal to, to live the lifestyle of, of, you know, what our parents had. And like I said, our parents put four kids to college. They, they got to do things as they wanted to do them. And then, you know, Yeti began to take on a life of its own and never, ever in my wildest dreams, we ever think it would do what it did. And it's been an amazing ride. That's Roy and Ryan Cedars, co-founders of Yeti. By the way, the brothers still see a lot of each other.

1:34:45In fact, they live right across the street from one another. Meanwhile, their dad, Roger Cedars, recently turned 80 and finally sold his own business, FlexCode. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please do sign up for my newsletter at GuyRoz.com or on Substack. This episode was researched and produced by Carla Estevez with music composed by Ramtina Arablui.

1:35:18It was edited by Neva Grant, and our engineer was Jimmy Keeley. Our production staff also includes Casey Herman, JC Howard, Alex Chung, Carrie Thompson, Chris Messini, Catherine Seifer, Sam Paulson, John Isabella, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.