With Yi-Hsin Chang (TMF Puck)
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TMF: Welcome to the first ever IPO Talk. Today our guest is Boise, Idaho-based eMeringue -- it's an online bakery specializing in, you guessed it, meringues. Founded in 1998 by current chairman, president, and CEO Larry McCloskey, who formerly ran an auto parts business, eMeringue takes orders via the Internet and ships meringues to customers all around the world. The company's actually going public today with The Motley Fool underwriting the oversubscribed offering. Hi, Larry, how are you today?
TMF: You don't mind if I call you Larry?
McCloskey: Oh, not at all. Most people do.
TMF: So how did you come up with the idea for eMeringue?
McCloskey: We get asked that a lot over at eMeringue. As you said, we were previously in the auto parts business and sales were just not that great. I was sick of my job, and I was thinking of quitting anyway. Then a little while later, I'm out at the store, shopping for some stuff for my wife and I go by the bakery and I see these gorgeous meringue pies. I can't think of a single company out there that sells meringues on the Internet. Every company I know on the Internet skyrockets. If we could find something on the Internet that no one else does and we could do it better than anyone else could possibly do, then that's a successful business model.
TMF: So how do people order a pie exactly?
McCloskey: Okay, well� [laughs]. I thought we went over this. It's not a pie, it's a meringue. A lot of companies will deliver the entire pie. That's a big mistake. What we do is just deliver a meringue. It's the top, fluffed egg whites, you know. A nice white mound of fun on your dessert. We put it into a box and send it to you. It'll get to you in around six, seven days. What you do at that point is, you put it on your pie. So you don't have to worry about the meringue. If you're having an important dinner, you can just focus on the pie and the entr�e and then when the eMeringue arrives, you can just put it on your pie.
TMF: And you can put it on any pie?
McCloskey: We came up with a chart to personally tailor what we think is the best meringue for your tastes. You know, like you may be an autumn, or a winter. We have different seasons of meringues. But you could also put them on whatever. You could put 'em on soup�
McCloskey: Pizza. We don't want to limit people's perceptions.
TMF: It seems like you'd have to sell a lot of meringues.
McCloskey: Oh, and we do.
TMF: Okay. And so what were your sales last year?
McCloskey: We sold� well� I don't want to give you the exact meringue count, but $11 million in revenues, just for half a year.
TMF: But you're still losing money?
McCloskey: Well, yeah� [laughs]. But, who isn't on the Internet nowadays? Show me a single company on the Internet that's profitable and they're doing something wrong. We had $100 million in expenses. A lot of that was for advertising. And we had to hire some really expensive chefs. We pretty much put them in a warehouse.
TMF: Okay, well, what makes your meringues so special?
McCloskey: Yeah. We care about the customer. We care about the products. Our chefs become attached to the meringues. We actually sit them in rooms with nothing but the meringues for a week. So that they sort of become -- I mean it's a Zen type of a thing -- but they become one with the meringue. We're not churning these things out on an assembly line like some companies try to do. Like Cyber Meringue.
TMF: So have you conducted taste tests?
McCloskey: Sure. My mom loves the stuff.
TMF: Well. You have to admit, Larry, this sounds kind of questionable here. Have you worked with consultants, or gotten a second opinion on this business model?
McCloskey: You know, a lot of people thought Coke was questionable. Who's gonna ever drink a Coke? Or who's gonna ever fly an airplane? No one thought the Wright Brothers could fly across America. What's happening here is I'm coming down here --I flew all the way down here from Boise, okay? And you're questioning the merits of our company. This is supposed to be a positive thing, okay?
TMF: Well, it just seems like you're throwing money away, but if you ha