Episode 468: AG1 CEO Kat Cole on Health, Wellness, & the Foundational Nutrition Movement

Thanks for having me.

Yeah, so today AG1 is one of the fastest-growing nutrition companies in the world, famous for our core product, which is called AG1. It's a daily health drink that combines a multivitamin, pro- and prebiotics, and phytonutrients to support nutrient gaps and gut health support that many of us need. It's a green powder. You mix it in water, shake it up, daily health drink.

The origin story is actually a founder who had his own health challenges, in particular gut health challenges, and realized he wasn't absorbing nutrients even with very expensive pill and powder regimes. And so he went to a clinic and learned that if you consume things more as nature intended — vitamins through whole foods, fermented foods, or probiotics alongside vitamins and minerals — that can improve absorption. So he created, with doctors and naturopaths and experts, what was then called Athletic Greens. So it's one of these origin stories where it's like, fix your own problem, then start talking to people about how it was helping his problem. And he realized other trainers and functional doctors and practitioners were seeking a similar comprehensive solution instead of so many separate things. And the business started to grow. It grew very organically, only e-commerce 15 years ago when it started.

And then as nutrition education and awareness of health and supplementation continued to grow, so too did the industry. So too did then Athletic Greens. And then COVID hit, which accelerated many of our desire to shore up our nutrients and our gut health to support immunity, and the entire industry grew and exploded. But a product that is so high quality, simple, and yet comprehensive like AG1 was positioned to experience those tailwinds in an even more profound way. And so the business started growing at hundreds of percent year-over-year.

I joined in 2021, and at the time the business was already doing 160 million in annual sales. The founder bootstrapped it, did not take any outside capital, had a little bit of debt, but it's a pretty phenomenal origin story. It's a real testament to the recurring revenue — it's a subscription business, people drink it every day — and to the loyalty of customers who not only stayed but told their family and friends. So the business was growing and on a tear when I joined.

By the time I joined, it needed a few very important things. One, it needed an operational level-up. We were only made in New Zealand at the time; now we're blending also in the United States. We needed more infrastructure. I saw that the industry — you could see that many of us as consumers were going to start demanding more clinical evidence, more efficacy of supplements. And this brand in particular had already been investing in that; we just needed to do more and tell the story more effectively, and then lean into the future opportunities, which would eventually mean product innovation and channel expansion. So over four years we 3x'd the business and are just now starting to step into some of that innovation and expansion.

There's a few ways. One, what's so interesting about AG1 is it is a little bit like the iPhone in that just as the iPhone keeps getting upgrades — you get an iOS update, you then get other versions of the iPhone that come out. And you could think of any other comparative examples that are similar, maybe a beloved shoe company where they keep upgrading the underlying technology. AG1 is the same. We have iterated the product many times over those 15 years. The AG1 today is not the AG1 or the Athletic Greens from 15 years ago.

So we, one, build a team of the right PhDs, scientists, and nutrition experts. Two, stay close to institutions who are conducting industry-leading research in nutrition and gut health in particular. And then three, build a team that can bring those things together: what does the world need? What is research telling us now? And then how do we use our capabilities to bring that knowledge into AG1 as a platform?

So many years ago, we didn't have adaptogens. We added rhodiola that is clinically proven to support energy and mitochondrial function. We then upgraded probiotics. We've added methylated forms of vitamins once the world learned, once research advanced, that many people have gene mutations that don't allow them to methylate B vitamins. And so we then upgraded the ingredients there. And the latest iteration of AG1 is rolling out to our customers right now.

And so continuous improvement as a brand promise, millions of investment in clinical human trials, which is very rare in the supplement industry, and having the courage to change something that people are drinking every day and love because it is better for them. And that's tough. I've run consumer brands my whole life, and the idea of upgrading a formula that millions of people love is a bit scary, a bit white-knuckle, because you can't do it naturally without slightly affecting the taste or slightly changing the texture or the sensory experience.

So bringing all those things together in a truly clean-label, high-quality way is an incredibly challenging endeavor, but this business has a history of it, and that is the way we make the promise and we deliver on that promise. So the formula will continue to keep up with science and not just be what it was in the past.

That's right.

You know, this answer is probably not as sophisticated or planful as people would hope, but I grew up in a single-parent household. I had to start working at a very young age. And who employs young people? Malls and restaurants. And so I started working in malls and restaurants. That was it. It was my start. I didn't think it would be my career. I thought it was just a good way for a young person to make money along with other folks who were doing the same thing.

But then a few very unexpected things happened. One, the company that I was with, Hooters Restaurants at the time, was growing rapidly globally, and there were many opportunities for advancement for internal team members, and the company needed existing employees to go travel and train new employees for expanded locations. So I was selected as one of those people, and then that led to me becoming a leader of those teams, opening franchises around the world.

And before I knew it, even as the first person in my family to get into college, I was failing college because I was traveling so much. I was never home. So I dropped out. I'm a college dropout at the age of 20. I later went back and got my MBA, so I do deeply believe in the benefits of ongoing education. But at this point it was like, I have opportunity here. And I came from very humble beginnings. So if you have opportunity in front of you, you follow the opportunity. And restaurant growth in the hospitality industry was my opportunity.

And I was at that company for 15 years. As you mentioned, I became an executive at a very young age. And it really was this storied part of my foundation where it wasn't necessarily my dream to be a hospitality executive — I thought I was going to go be an attorney, actually — but it became the dream that I was living. I absolutely loved it, and starting in hospitality and restaurants certainly shaped my approach to customers, to teams, to leading, and to consumer brands with that hospitality and service lens.

There were so many lessons. Ten years is a long span, and in particular that 10 years. So the first year — I joined Focus Brands in 2010, so it was the end of the Great Recession. So I took over a business, Cinnabon, based in malls and airports during a recession when people don't travel or shop. So I took over a very challenged — a beloved brand but a challenged business. And then the end of my 10-year tenure there was 2020, which was complete decimation of the industry.

And I ended up staying. I was actually planning on leaving right before COVID hit, and then for many reasons decided like, this is not the time to leave. I need to stay and lead through this moment that no one knew how long the deepest of the industry impacts would last. And I'm so glad I did. We navigated it with integrity. We came out quickly and profitably. And so even if you just think about those 10 years, we're marked by crisis bookends.

And so I would say the lessons — there are a few lessons from the crisis seasons and there are a few lessons from the boom times in between. One lesson from the crisis season, actually both of them, was leadership during a crisis or a challenging time or a time of headwinds requires an unbelievable amount of clarity and focus.

So with Cinnabon, it was clear: the brand is beloved, the business model's broken, foot traffic is down. I can't change the macroeconomic climate, but we can work together to optimize the people who are here. So we're only going to focus on the immediate customer we have, which at that point was mall employees and airport employees. The customer base shifted from non-employee customers to employee customers as a disproportionate representation of the customer base. So more price-sensitive, eating more frequently. We have to change the menu, change the portion sizes. And so get in and focus on who is the customer now, what do they need, and be courageous enough to make fairly massive changes to the menu and the pricing structure to survive this window, and then work on innovation that will unlock opportunity when things turn positive, because they always do. It's a matter of time.

Similarly, during COVID, I remember when the pandemic hit and the franchises — we're talking billions in revenue — just decimated overnight. Franchises lost... no one had a playbook. There were not clear guidelines, of course, they weren't established yet on can you be open, if you can, how to be open. It was the Hunger Games for sanitizer. You know, it was an incredibly difficult time.

And so while I did not have many more answers than the average person in the industry — I had some given our scale — but I needed to rally the team around what was possible, not try to be positive in a disconnected way. It's more, this is what's possible. What's possible is we are going to focus on people and cash. That is it. If you want to talk to me, you have to talk to me about people or cash, ideally both. Our only goal is to preserve those right now. And that is a gear shift from where we were prior.

We were talking about, you know, pricing strategies and testing third-party delivery and digital menu boards and all these things that when you're completely shut down don't matter in the moment. And so shifting gears to we're protecting cash, we're protecting our people. And our people includes our communities, our customers, our employees, our franchises. And then getting through that season, which was really only a couple months, and being able to shift gears back to now we need to not be in pure preservation mode. We need to be in take-advantage-of-the-opportunities-that-are-starting-to-unlock mode.

So we had invested in technology three years prior that allowed us to have a very strong delivery business when many other restaurants had not. We had already partnered with third-party delivery companies. So we had the operating model, the contracts, the pricing structures. So the minute we could be open, we unlocked more revenue streams than the average restaurant because of the innovations we had made when we could have never predicted this outcome.

And so this idea of, one, when things are tough, you can only focus on one or two things and everyone needs to be aligned — that is all you're protecting or focusing on. But then don't set up residence there. Like, there is a moment where you can be late to return to growth, you can be slightly early, you're never going to be right on time. I'd rather be slightly early. So let's open up, let's try to leverage our partners, let's do what we can. And our franchises came out of that very quickly.

Very similar to when traffic came back in malls and we had innovated smaller portions, and we did it to survive, but it actually helped us thrive once the macroeconomic climate turned more in our favor.

There is only one answer to this question, and it is having a high-quality product. There is no gamification, there is no business model, there is no marketing strategy that can drive an enduring retention pattern if not for a high-quality product that people find worth renewing their financial commitment to every month.

It's not like an expensive one-time purchase and then they could be satisfied or dissatisfied and then they're happy or they're not. It is a monthly commitment that shows up in their bank account, a reminder that you are paying for this, and a shipment that arrives at your door, a reminder that you are paying for this. So long before any subscription business starts tinkering with optimizing customer flows and conversion rates and sub-take rates and all of the language of the digital subscription industry, there is nothing more powerful than having that product be beloved by the people for whom it is intended.

Not everyone, right? Some people are going to subscribe to try and decide it's not for them. But for the people who it should be for, they not only need to be delighted, they should have a very high referral behavior. So, I love this, it makes a difference, you should try it. That is how AG1 got its early traction. We are definitely known for podcasts and marketing strategies and things like that. But the largest driver of our growth and our compounding revenue streams over time, the subscription business being healthy, is simply repeating customers and them telling their family and friends.