An Interview with Ariel Barbouth of Nuchas
Anjali Oberoi | If Times Square, Greeley Square, or Brooklyn Borough Hall is on your daily commute, you may have come to think of Nuchas’s kiosks as established fixtures of New York street food. You might be surprised to learn that the maker of delicious hot pockets filled with flavors from around the world has only been around since 2010. Or that street sales have been an ever shrinking portion of Nuchas’ business, whose products can now be found in supermarkets, on trains, and on several international flights.
The story of Nuchas is special because it touches base on many of The Workshop’s core topics: bringing values into business, growing a product company, introducing novel foods to a market, balancing retail and wholesale strategies, and making other tough decisions between different growth paths.
Bernoulli Finance has had the privilege of playing a role in the past four years of Nuchas’ adventure. It was time for us to share some of that story. So I subjected my friend and Nuchas founder, Ariel Barbouth, to an interview.
Q. To kick things off, could you say a few words about yourself and Nuchas?
AB. Nuchas is based on the idea that food can be a vehicle to open people’s minds to new perspectives, expose them to new experiences, and bring the world closer together. Our goal is to deliver unique handheld meals that remind us how delicious cultural differences can be.
My personal journey to creating Nuchas was all but straightforward. My first career was in venture capital, an industry that experienced a major downturn when the dot-com bubble crashed in the early 2000’s. So around then, I migrated to the food industry. But it was not before a four-year long soul-searching retreat in my native Argentina that I had my Aha! moment. The empanada, or as we often call it the "nucha" - a typical Argentinian hot pocket - was the perfect tool to help me realize my vision. You can hardly find a more practical vessel to expose people to all kinds of flavors. With that idea in mind, I went back to NYC and founded Nuchas. That was in 2010.
Our revenue the first year was $39K. Then things accelerated with the opening of our Times Square kiosk in 2011. A year later, we added a truck with a loan from NYBDC. And in 2014 we started focusing on growing wholesale, which demanded that we multiply our production capacity. In fact, one of our first collaborations with Bernoulli Finance was on the acquisition of our own manufacturing facility, which has been operational since 2015.
While we have continued to expand our retail operation, with now three kiosks and a truck, this year, wholesale should surpass retail by a ratio of 2/3 to 1/3 in terms of revenue. We now sell our nuchas through Kings Food Markets, Balducci’s, and Whole Foods among other big names. We also have contracts with a couple of major airlines.
Q. You refer a lot to promoting new foods and flavors, often rooted in traditions from around the world. How do you find people’s response to that in the US?
AB. For a start, I should say that we do not really make new things, but we make things differently. Our claim to novelty is that we can deliver you delicious chicken tikka in a format that you can grab in one hand, eat while strolling the city, and enjoy just as much as a platter.
But more generally, this is a great time to promote new or little known flavors in the US. Just count the number of novel food concepts that are now proposed at Smorgasburg, or for that matter at any urban food fair in America. A study conducted about a year ago showed that 40% of millenials order something different every time they visit a restaurant. Think about what this says! More and more, people are approaching food as an adventure, an opportunity to explore.
That doesn’t mean that we - food professionals - don’t have to also deal with contemporary constraints. In particular, consumers are increasingly health-conscious. At the same time, the pace and cost of life are driving them towards convenience and budget food options. The size of the refrigerated meals market alone is expected to reach over $30 billion by the end of 2018.
We constantly try to integrate these factors. Taste, healthiness, convenience, and affordability - these are the four pillars that guide Nuchas’s product development strategy.
Q. You have pursued a rather uncommon strategy for a small food business. While you are now strongly focused on wholesale, historically, Nuchas’s growth was led by retail, and retail continues to be an expanding branch of your business. Can you explain the thinking behind this approach?
AB. This is true. We were already operating two kiosks - Times Square and Greeley square - and a truck by the time we started investing in our manufacturing facility that bolstered our wholesale strategy. And, we added the Brooklyn Borough Hall kiosk only a year ago. We have stayed committed to a strong retail presence.
As typical for a food business, we make higher margins on our retail sales. But it is much harder to scale through retail than wholesale. And that is why, many small food businesses focus exclusively on the latter.
That said, we do not just see retail as another sales channel. For us, retail is also an engine to accelerate consumer awareness of our brand and products. We view our kiosks as tools to familiarize consumers with our nuchas, so that in turn, when this nucha reaches stores, it is not just another random product on the shelf. In other words, retail is not just retail. Retail helps us be stronger in wholesale.
Q. Off the top of your head, what was the most surprising thing in this journey? And is there anything you would do differently?
AB. There’s a quote by George Bernard Shaw that I really like. Speaking of love affairs, he said: “Any fool can start one; it takes a genius to end one successfully.” And I understand that the analogy with business has already been made by many people.
As soon as you experience a bit of traction in business, opportunities start popping up left and right. The challenge then is no longer about launching a venture. It is about selecting only the opportunities that truly advance your objectives. And if you venture down a path that is not for you, not only are you exposing yourself to greater financial risks, you are wasting the rarest resource you have as an entrepreneur: time.
A few years ago, we found ourselves exactly in that situation. We were offered the opportunity of opening a second retail location on Times Square. We thought - Great! Times Square has been good to us. Let’s do it! So we created a small eatery where we served various traditional Spanish bites and wine. The idea wasn’t bad. But we were suddenly pulled into a six figure investment and countless operational challenges, at a time when we should have been all focused on growing the Nuchas brand and products!
Fortunately, we put an end to this distraction in time, and left it with a better understanding of who we are and where we want to be.