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Hank Margolis | In the Trenches
AigoraCast · Episode 139
Hi, I'm Dr. John Ennis, CEO at Aigora. In this episode, I enjoyed speaking with Hank Margolis of Flavorchem about his experiences scaling Zevia from an early-stage venture to a public company. We explored product reformulations, company culture, navigating market shifts toward functional beverages, and his ongoing work at Flavorchem.
I hope you enjoy this conversation as much as I did, and remember to subscribe to AigoraCast to hear more conversations like this one in the future!
Hank Margolis is a beverage operator and development advisor who leads The Bench, Flavorchem's beverage development services group. He helps emerging and established brands formulate and commercialize new products.
His career began as a civilian mechanical engineer for the US Navy. After 15 years in business consulting focused on process improvement and functional turnarounds, he participated in the acquisition of Zevia in 2010. As COO for 12 years, he helped scale the company through its growth and 2021 IPO. His work combines operations and product development with an emphasis on collaborative culture and strong relationships.
Expertise: beverage formulation and commercialization, operations, brand growth, and collaborative leadership.
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Lightly edited for readability. Speaker order and meaning are preserved.
John Ennis: Okay, welcome back, everyone, to another episode of AigoraCast. Today, I'm very happy to have my friend Hank Margolis on the show. Hank Margolis is a seasoned beverage operator and development advisor. He currently leads The Bench, the beverage development services arm of Flavorchem, a privately held flavor house, where he helps emerging and established brands formulate and commercialize new products. Hank's diverse career began as a civilian mechanical engineer for the US Navy. After spending 15 years in business consulting focused on process improvement and functional turnarounds, he participated in the 2010 acquisition of Zevia, just as the stevia and better-for-you soda trends were emerging.
Serving as COO for 12 years, he was instrumental in scaling Zevia from 5 million to 150 million in sales, culminating in a 2021 IPO. Having learned the beverage business in the trenches, Hank has personally led efforts to launch hundreds of new products. His philosophy combines analytical rigor with a focus on collaborative culture, recognizing that human relationships are the ultimate key to success. So Hank, welcome to the show.
Hank Margolis: John, thanks for having me.
John Ennis: Yeah, it's really a pleasure. We met each other on LinkedIn, which is, I think, a great place to just have these kinds of random encounters, and got to know each other, and I thought you'd make a great guest. I think, in particular, what you bring that's really interesting is more the operator side. You know, sensory science is kind of in the middle of lots of fields, and it interacts. I think one of the best things that sensory scientists can do to increase their value to a company is understand the other parts of the business.
And I thought it'd be really interesting to talk to you about, you know, your kind of your background. You know, you interact with sensory scientists, but you've been on your own journey, and maybe you can kind of take us through the history of, you know, how did you get involved with beverages?
Hank Margolis: Well, thanks, John. First, you know, again, I really appreciate you having me on. I'm honored to be a guest. I've seen your various guests in the past, and I'm honored to be a part of that group of people. Yes, I mean, my career, once I left the engineering world and got my MBA, I jumped into the business consulting world. I was with Arthur Andersen; they were building a large business consulting practice, and spent a number of years there, and just moved through a variety of different roles and journeys in my career.
I spent some time at GE Capital, I spent time as an independent consultant, and often I was working with large companies. You know, it could be a Prudential or a Motorola and companies like that, doing supply chain work, sourcing, and things like that, and ended up, fast-forwarding, to with a company that was called Alvarez & Marsal in their business consulting group, and spent about 4 years there. I spent about 3 of those years at one client, and at that client, I developed a relationship with the president there, who was a recognized expert in the natural products industry, not only on the food side, but also on personal care.
He originally was a head of sales at Kashi before they sold the business way back when, and he also became the founder of a company called SPINS, which is really the ubiquitous data company with syndicated data that all CPG companies in the natural space particularly use to see how their products are performing in the marketplace. So he's an expert in that industry, and we spent, you know, 3 years; I worked closely with him as a consultant, fixing a lot of stuff at their company. And he decided to leave his company and said, "Hank, I'm going to go buy a company. Do you want to be my operations guy?"
And that's really how it started. So we looked at a few different opportunities, met with some investors, did a few pitches. He found the Zevia original founders, who were looking for a deal, and we ended up, you know, bringing together a group of investors and acquired Zevia back in 2010. And suddenly, I was a beverage guy.
John Ennis: So Zevia had been, how long had they been, what were they doing before you ended up getting involved?
Hank Margolis: Zevia was founded around 2007. Stevia as a sweetener was not even approved or acknowledged as GRAS by the FDA yet. So they created a formula that was stevia plus erythritol. And there was like 14 g of erythritol in the product at that time. Stevia still didn't taste that great; it was all Reb A for those of us that know the stevia terminology, very bitter, and so it was more of an erythritol soda than a stevia soda, as the founder liked to tell me. And by the time we bought the company in 2010, they had really been operating for a couple, you know, 2 full years. They were producing seven flavors of soda, and they started out as supplement labels.
Once the FDA, you know, provided their no-questions letter for GRAS status, we converted to food labels. And so when we bought the company, we were doing about 5 million in sales. We were fully distributed across the natural channel. So whether it's Whole Foods, Sprouts, the mom-and-pops, UNFI as a distributor, the co-ops. So we were fully distributed across the natural channel, and we were growing in some of the more mainstream food channels. But we were still doing 5 million in sales, so we were relatively small.
John Ennis: Right. And so then, so you got into this, and then it was an amazing success story. I mean, the growth was just incredible. At what point did you realize, "Okay, this is really something"? Or did you ever think it was going to take off like that? What was your...
Hank Margolis: You know, we had a lot of confidence and, you know, you don't go into something like that with a lack of confidence. At the time, there was so much being written about sugar and sodas, and a growing amount of concern being raised publicly about artificial sweeteners. And to come out with the first soda that had neither of those two sweeteners seemed to make a lot of sense. And even, you know, in the natural channel, sometimes foods that come out, foods or beverages that come out in the natural channel, often are giving up something in performance, because they're not going to taste like the mainstream version.
And our consumers at that time were philosophically aligned with our product. You know, "We're going against Big Soda, you know, we're doing something different. Okay, it doesn't taste like a Coca-Cola or a Pepsi; it maybe doesn't taste as good as a Fanta or an A&W, but this is what I want to do in my life, and I'm coming back to soda because I had to give it all up and just drink water, and now I can drink a soda, and we're philosophically aligned." So the consumers were, I'd say, forgiving with some of the early days of the formulation, and we just committed ourselves to continuous improvement on the formulation, and get to a point, you know, we always thought about, like, would a Walmart shopper buy this product?
And it took a few years, you know, of a number of reformulations to keep improving and improving it to get to a point where we really thought it could be a great crossover product.
John Ennis: Mm. And what was your learning curve like there? I mean, so you had been, you know, a consultant prior; you had been kind of, you know, around a bunch of different businesses, but there must have been a bunch of things you had to learn very quickly. I mean, what were the early days of life like for you there at Zevia?
Hank Margolis: Yeah, I mean, my entire career was based on steep learning curves at every client I ever served, right? If I jumped into an apparel company, you know, I'd be thrown into a meeting where I'd have to facilitate and figure out how to solve problems in apparel, and I didn't even know the language of apparel, or whatever it is. So I, you know, that was really what I was good at was getting up a learning curve as quickly as possible. So, you know, and it took years and years, of course, of, and I, you know, I think that we, you know, none of us ever stop learning, right? So that's just a journey.
But, but we did some interesting things back then, and, you know, we relied on our suppliers. So our stevia company, where they were experts, they had, you know, the inventor of the modern high-purity stevia processing method on their team. Our co-packers, you know, one was Sacramento Coke. So those guys know how to put, you know, liquid and bubbles into a can. And the same with our partners on the East Coast. So, you know, we relied heavily on the experts in our supply chain, but we had to get up to speed ourselves. And that was definitely a journey.
John Ennis: Yeah. And one of the things that really in our kind of preliminary call that I thought was really interesting was that the effort... You talk a lot about culture, and I think it was kind of later in your career that you realized that you have to intentionally set culture, but can you talk about some of the things that you did in retrospect that helped create a culture there at Zevia that was kind of well-suited to innovation?
Hank Margolis: Yeah, that's a great question. And you're right. I mean, when we started, we weren't thinking about culture. We were thinking, you know, we've got to launch five new flavors within 3 months, and we've got to, you know, get another co-packer, two more co-packers online, and we've got to launch a new product, a tea or a kids drink or whatever it was. So in the early days, it was very focused on the mission. But at the same time, what was happening was that our executive team, which includes me and our CEO and our my counterpart on the sales and marketing side...
John Ennis: Yeah.
Hank Margolis: We were basically bringing ourselves to work.
John Ennis: Yeah.
Hank Margolis: You know, so we didn't really have our work persona and then go home and have our home persona. We brought our personalities to work. We hired a kind of an eclectic group of people back when we were 10 or 15 people. So we had some very eclectic people that all brought their own personal selves and personalities to work. And we embraced that. And it grew from there. And I remember, you know, every person that I interviewed from day one, I would say to them, "You know, we have a lot to do. We've got to achieve a lot. We've got to succeed. But we can have fun while we're doing it."
John Ennis: Yeah.
Hank Margolis: And that kind of became a thread that carried through for a long time. And, well, until I left, for sure. But you know, and I remember there, we were probably 6 or 7 years in, and we were doing a large team meeting where we, you know, brought everybody into town, flew everybody in, and had to figure out, what's our agenda? We've got to do a speech on this, and a talk on that, and a presentation for this, and have a fun event at the end, and what are we going to do? And my partner and I decided, "Well, let's do a culture session."
So, I remember when we were gaming it out, I said, "Well, I don't want to have a culture session where you and I tell everyone about our culture. I want to have the whole company tell us what the culture is." So, what we did was, when everybody showed up, we put a little voting system in place where people could write down any adjective that described our culture. They could put two, three, four, five submissions in the box, basically. And everyone in the company submitted adjectives that describe our culture. And then I turned them into a word cloud.
Right? So we had to say, okay, someone said "family-friendly." And they said it four times, so I would attribute family-friendly a vote count of four, right? So any words that were used more showed up larger in the word cloud. I don't know if anyone's ever done these. I think they're called word clouds.
John Ennis: Oh yeah, yeah, our listeners would definitely know what word clouds are, yeah.
Hank Margolis: Yeah. So there were a lot of words that were used once, and there were a handful of words that were used six or seven times. And then our graphics team created a Zevia leaf, our logo, a natural leaf, and created that with these layers of the word cloud. And layer one was all the small words, and we talked about them. And then layer two came up, and then, "Oh, these are the ones that more people say." And then the top layer was like the big reveal, you know, was like five words that people said the most.
And the number one word that was used by everyone was "fun."
John Ennis: Oh, that's great.
Hank Margolis: And we got to present the company's view of our culture to the company in this reveal, and got a chance to just talk about it, and hear from them on the importance of it. And that was for me a pivotal time when it comes to culture, because it really brought home the fact that, you know, culture's going to happen whether you do it on purpose or not. Right. You're going to build some kind of a culture. Is it good? Is it bad? You know, what are the attributes of it? And I think we were just building a fun, results-driven culture the whole time and didn't realize it until that moment.
John Ennis: Yeah. No, I think fun is so important. Like, you know, we have the guys here, we have, you know, remote team members, but we also have people that work in person, and I think that, actually, I'd be curious about your thoughts on remote versus in-person work, we can come back to that in a second, but yeah, I really strive for that. I think that you have to work hard, you have to focus on what you have to do, but you can have fun while you're doing it. And we have a silly game we made, like a little video game that we made, and it's like a company game we played every morning.
And I do think that you have to have that attitude of like, "Okay, you know, we're like killing it, we're working hard, we're doing awesome things, but we're having fun while we do it." I think that's really essential to like being creative, yeah. What are your thoughts on, oh, sorry, go ahead. Yeah, Hank.
Hank Margolis: Well, I was just going to say, yeah, the fun part was definitely a thread, but the employees really felt that the management team had their backs. You know, so there were, you know, fun is one thing, but if you're kind of getting screwed here and there by your manager, supervisor, executives, you know, the fun is only going to go so far. So there was a much broader culture beyond fun, and it was really moving for me when I, you know, had announced that I was going to be leaving, and had many interactions with people, some that were just hired, you know, months earlier that I barely knew, and some that were there for, you know, 10 years, and people would pull me aside and just tell me stories about interactions that they had with me, many of which that I didn't even remember that were really pivotal to them, and how important that was to them, and how much they felt like our executives had the backs of their employees.
And so they would come to work just feeling like, you know, "I'll take a bullet for these guys. You know, we're having fun, they have my back. If I need something, they got me, and let's go the extra mile," and that kind of thing. So it was really an amazing journey. Yeah.
John Ennis: Yeah, that sounds really, yeah. So one of the things you talked about: bumps and bruises too along the way. So what were kind of battle scars, which I have plenty of myself? So if, you know, I mean, I had a startup for 3 years, and I had to finally admit last year that, I mean, earlier this year we had to finally call it a day, but I mean, it was, you know, had to come to terms with that the fact that startup didn't succeed. And, you know, that was hard for me as somebody who, you know, I found that I've always been successful in my life.
Aigora was successful. I left Aigora to do a startup, and 3 years of, you know, trying very hard, putting everything into it, and eventually, and sometimes, you know, you learn lessons and you look back on what you might have done differently. And, you know, I had to just close that chapter of my life like earlier this year, and I'm back at Aigora. And I mean, I'm very happy to be back at Aigora, but I learned a lot, and, you know, left me with scars. What were some of the scars that you would say, like the hard-won lessons that you would like to maybe spare other people from having to learn the hard way?
Hank Margolis: Well, one of them is, you know, on the innovation front, I know a lot of folks listening are in the world of product development and innovation. And I do believe that strategy is important, and some of strategy is defined by: what do you say no to, right? And defining your guardrails on how you're going to compete and operate. But at the same time, that can be an anchor. And, you know, if I could kind of do it all over again, I would find a way that we always had, in my mind, I would always want like a skunk works, you know, a secret little back room that's tinkering on new things that may not be within the guardrails of what you're currently allowed to do, but keeping an eye out on where's the market going. I mean, this is all about the consumer, right?
Right? We're not making products for ourselves; we're making products for the consumer, and that will then create value for the investors. So that's something, you know, Zevia was, and as far as I know, still, focused on being a better-for-you product, but not a good-for-you product. So that means that we had strict guardrails on functional ingredients. Right? I mean, the only functional ingredient we really had was caffeine, which is required for, you know, colas and, you know, typical sodas that are caffeinated. But as it related to anything else that would be functional, that was just a hard no.
And, you know, I remember getting signals from one of the big three soda companies that, early on, that they really, you know, "Eh, they're really more about better-for-you products; they're going to be more focused on functionals, and, you know, no thank you," kind of a thing. And we heard that, and, you know, we were sticking to what we were good at, sticking to what we did, and then, you know, as it turned out after I left, and it was happening while I was there, and, you know, 2020, '21, '22, you know, Olipop and Poppi were starting up and coming out with their gut health sodas, right, and, you know, with the prebiotics and the probiotics, and the consumers got very excited about a functional soda.
John Ennis: Yeah.
Hank Margolis: And while we were, you know, at Zevia, while we were focused on whether it was raising capital or going public and ringing the bell, they were growing their young brands and catching, catching the eye of the consumer, and their growth rates, you know, far exceeded the average growth rates of Zevia over the last 6 years, and they've completely taken over that category that previously Zevia had owned. So yeah, that would be one of my takeaways, is, you know, strategy's great, but have some resources focused on where the market's moving, and don't take your eye off that ball.
John Ennis: Yeah. It's really tricky, right? I mean, because, yeah, at some point, the thing that caused you to be so successful is, the world changes, and you have to change along with it, and it's, I mean, the same thing kind of happened to Aigora while I was gone, you know. Aigora was very successful company, and I went to start my startup, and they kept doing what they were doing, but the world was changing. And, you know, the things that were selling really well in 2021 were not selling in 2024, you know. And I mean, they were selling enough, like the company was treading water, but it wasn't, you know, it didn't have the new stuff.
And now since I've been back, of course, we have new stuff like through the roof, but yeah, I agree with that 100%. You've got to be always thinking about the market and what it needs, and not just keep doing what you've been doing.
Hank Margolis: Yeah, and there's, you know, there's something about, you know, you become so passionate about your brand and your product, and it's easy to just drink your own Kool-Aid. You know, and, you know, at Zevia, we just kept looking at the total market size of soda and all the distribution points where we still weren't covered in, and we just didn't spend enough time watching where the rest of the market was going, and even tinkering, you know. It wasn't, you know, beverage companies, they, you know, large beverage companies launch new products all the time, right?
A limited-time offer, LTO: put something in a little region, see how it goes, little test. They can, you know, shut it down quietly and not get any egg on their face, but just keep poking at new things.
John Ennis: Right.
Hank Margolis: And that, you know, that was not something that we did. So, yeah. I mean, Hansen's Beverage used to be Hansen's, and they launched a product called Monster.
John Ennis: Right, right.
Hank Margolis: And the rest was history after that.
John Ennis: Yeah, that's really interesting. Yeah, we could keep talking about this forever, but we have a short period of time left, and I do want to get into what you've been doing since you left Zevia, because that's also very interesting. So you went on a little journey. So the IPO was 2021, and you left about a year after that. So then how did you get down to Flavorchem? What was your kind of path, and what are the things that are on your mind these days?
Hank Margolis: Yeah, great question. I mean, you know, my first priority was taking time off. I was the dad that was never home and always traveling and working late hours, and it was pretty exhausting; had three kids. And so, you know, priority one was doing the cliché of spending more time with my family and repairing some of the, you know, damage that was done there, if I could say it that way. And to that end, I think that was generally successful, and spent a couple years just on really a sabbatical and starting to do a little bit of independent consulting.
And then I just started getting the itch for getting back into beverage. And I knew the Flavorchem team. I just placed a call and just called them up and said, "Hey, I'm doing some consulting, and I really just want to work with people that I like. And do you have any projects? And what can I do? Because I'm a bit of a Swiss Army knife based on my consulting career." And that got them thinking, and I didn't know it at the time, but they had this beverage development services group called The Bench.
And they started thinking maybe I would be a good fit for coming in and leading that group. So we just worked out a deal, and I came in and joined Flavorchem. First, you know, there was about a 6-month ramp-up where I was just doing some business development for them, and succeeded in bringing them a customer that's now, you know, doing some sizable business. And then I joined up as the head of The Bench.
John Ennis: That's really good. So, you know, kind of a theme of this is you talk a lot about relationships, you know, and how important they are, because I think that really does guide a lot of where your life goes, you know, the relationships you've been in. So, yeah, maybe, you know, we're almost out of time here, can you kind of share your thoughts on the balance between, you know, focusing on relationships and focusing on, I tend to, you know, historically, growing up, I would be very work-oriented, but the older I've gotten, the more I've started to really value relationships, and the more I think that it's really an important part of, you know, having an effective career is cultivating healthy relationships.
What are some tips you might have, especially for younger listeners, about like this side of business that I think is often underappreciated?
Hank Margolis: Yeah, it's a great question. I mean, you know, to me, we have computers, and we have email, and we have, you know, spreadsheets, and we have all kinds of other tools that we use for our jobs, and, but at the end of the day, business comes down to people. And people are doing things for other people, whether you're, you know, in an internal process where you have to hand something to the next person, or whether you're dealing with suppliers or customers. And particularly as a startup when at Zevia, for example, we were small, and we were trying to get, you know, co-pack capacity to run our products, and, you know, we had special needs, and our product was a bit of a pain to run, because it was foamy, and, you know, there's a lot of larger customers that were in these manufacturers that, you know, spent a lot more money than we did, and we were a little guy.
So, you know, how does a little guy get favors when we need favors? How do we get attention? And one of the key things that we used was relationships. They really liked us. And it wasn't like we were pushovers. You know, it doesn't mean you're, you know, you're just a pushover of a customer, but, we had strong relationships with our suppliers. We even brought in, you know, I had hired a 40-year beverage veteran on the Zevia side who spent 10 years as a plant manager at Coke. And then he ran a division of Pepsi and oversaw engineering and everything for like nine different plants or something.
So this guy knew more about a beverage plant than most of anybody at any of the co-packers that we used. So when we would come to those plants to run a new product, or, you know, do some troubleshooting, or run a new package, he would come to the plant, and he ended up being like a consultant for each facility that he went into to fix things at their facilities. So here we were, this small company, Zevia, that was trying to grow up and be a meaningful customer to some of these large bottlers, but every time we showed up, the maintenance team would come running to us and have us fix things for them, because they couldn't figure it out.
So it was an interesting dynamic, and that's just one example. But, you know, I had a very senior person at one of the big three that we worked with tell me, "You know, Hank, I'd love to fire the other big customer, the big customer we have that does 30 million cases, and just work with you guys if I could, but you got to get your volume, you know, up close to that." So yeah, I mean, when you need a favor, you need relationships. And when you're a startup, and things are going haywire, you need a lot of favors, because things don't go as planned, you know.
We had a lot of amazing, great moments, had a couple difficult moments. So they saw me at, in the, in the good moments, and they saw how I handled them in the difficult moments. And you know, how you handle difficult moments says as much about you as a, as a businessperson as how you handle the good ones.
John Ennis: Yeah. That resonates with me 100%. I mean, I look back on my life, you know, it's like I've made it through the tough times because of relationships, and the things I regret sometimes are blowing up relationships unnecessarily. So yeah, definitely the handling the bad times is very, very important when you're in a, in a tight, tight spot to remember, you know, this is not the end. There's a future here, and we want to, yeah, handle this properly.
Hank Margolis: Exactly. Yep.
John Ennis: Yeah, I agree. All right, well, Hank, it's been a pleasure. So how can people get in touch with you? What's the follow-up? I mean, we hardly got a chance to talk about Flavorchem, but I would say that you're doing a lot of really interesting things there, and if people want to reach out, they'd like to connect with you, what are some good ways to get in touch?
Hank Margolis: Yeah, well, thank you. At Flavorchem, yeah, we're doing a lot of innovative things in our beverage development services group. You could find us at Flavorchem, that's Flavorchem, C-H-E-M, so you can find us online at The Bench, and you can find me on LinkedIn. So you can DM me there. So, I'm pretty easy to find.
John Ennis: Yeah, great. All right, awesome. Well, it's been a pleasure. Thank you so much, Hank.
Hank Margolis: Thank you, John. Appreciate it.
Aigora is a contributor to the Aigora blog, sharing insights on AI-powered sensory science and product development.