In this episode of MarketFoolery, host Chris Hill chats with SoapBox Soaps CEO David Simnick about the success of the company behind one of the top hand sanitizer brands in the U.S. Learn about its humble origins and its mission, as well as how SoapBox helps non-governmental organizations around the world achieve better sanitation. Find out about its various products, business strategies, and growth over the years.

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This video was recorded on August 4, 2020.

Chris Hill: It's Tuesday, August 4th. Welcome to MarketFoolery. I'm Chris Hill. Thanks for taking the time to listen, I appreciate that. You could be listening to anything right now, and the fact that you're listening to this, it doesn't go unnoticed or unappreciated, I don't take it for granted, so thank you.

Today, I want to introduce you to a CEO named David Simnick. He runs SoapBox Soaps, a soap company. They recently started making hand-sanitizers. And now, SoapBox Soaps has blown up to become one of the top hand sanitizer brands in America. This is one of those situations where it's tempting to throw the phrase "overnight success" around. But to call SoapBox Soaps an overnight success would not only be incorrect, it also glosses over the journey and the mission of the company and its founders.

There are a lot of reasons to like this company, there are a lot of reasons to root for this company. So, here's my conversation with David Simnick, starting with asking him to take me back to the very beginning when he first got the idea to start a soap company.

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David Simnick: SoapBox starts with, I used to work for the United States Agency for International Development as a subcontractor, which is a glorified way of saying a paid intern. And my job there was to find cheaper parties for new projects. And I did so much research about programs that I completed, and realized that there was a dearth of focus on hygiene. So, in water sanitation and hygiene work around the world, often a lot of focus is on water and there's a lot of growing attention toward sanitation; thank you very much, Bill & Melinda Gates Foundation. But back in 2009, there just weren't that many people who cared about hygiene.

So, called up my best friend, I was, like, hey, we're going to start a soap company. For each and every time we sell one of these items, we're going to donate a bar of soap, and that in turn, is going to help fund all these NGOs around the world as well as here at home. Food stamps don't cover hygiene products, so it's actually one of the most requested items in food pantries as well as at homeless shelters, especially if they have a shower program. So, we started with the charity in mind, basically the business was an afterthought to, hey, let's actually go out and do this good.

So that was No. 1, but we kept doing it as an evenings and weekends project. I literally made the first batch of soap in my kitchen in 2010. So, enter Fight Club joke here; a 22-year-old male living with six other men starts a soap company. And, yeah, it was strange and weird. But Dan Doll, one of my best friends; and I; and Eric Vong, another one of my best friends; and Stephanie, same thing, all started SoapBox. And Dan and I just continued to grow and build it. We went full-time in 2012. We started mostly in natural food stores and channels and like those types of retailers. Then we started getting into bigger box retailers in 2015.

And we had just awful branding, like, the worst designed bottles that you can imagine. They just looked really bad. And a lot of that was because we didn't know any better. But then, after we started getting all this distribution and growing our business, we started realizing that, hey, if we really wanted to grow this, if we wanted to expand, we just had to be better in so many different ways. So, entering 2018, we had worked with Anthem, [Anthem Worldwide] which is this amazing design agency in New York, for about a year. We launched our new branding, we started picking up speed, but we doubled from '18 to '19, we're on track to double again from '19 to 2020.

Then COVID hit. And what's so interesting is, one of our retail partners that we were in discussions with for about 18 months, reached out to us and said, hey, do you make hand sanitizer in February? And we're like, we've always known how, because the product pipeline, we make soap and shampoo and conditioner and body wash, and hand sanitizer is very much along similar processes to make. So, I got back to them and said, yeah, we think we can make this.

And then, believe it or not, the next day, we were on a call with Wegmans, where they were like, hey, we want to order 50,000 units of liquid hand soap. Which, on any given day, you know, a 100-plus-store chain that's as amazing as Wegmans, ordering 50,000 units, is pretty significant. So, we said, hey, we make hand sanitizer, do you guys need that as well? And they were like, oh, you started making hand sanitizer, that's great, we'll take a million. And we're like, what, what? [laughs] So, very quickly we realized that, oh my gosh! We're absolutely in the hand sanitizer business now.

So, things kept on growing and building. We then had a call with Walgreens, and then we had a call with Harris Teeter, and then we had a call with Rite Aid, then we had a call with Essendant which is North America's largest office distributor. Like, many people have never heard of Essendant, but if you've ever bought through W.B. Mason or Staples or Office Depot, you're probably buying Essendant. And then, we just kept on going. We actually do the hand sanitizer now for some pretty big retail chains.

So, I think, for us, the reason why we are given this opportunity, Chris, is we've spent years having coffee, breaking bread with all these buyers. And so many new people entered the industry in hand sanitizer when the two big guys couldn't. So, when Purell, which is owned by Gojo, part of the whole company, basically was not able to fulfill demand because the government basically said, you need to fulfill the medical channel. And then Vi-Jon, which does pretty much all the private label hand sanitizers that you see in the market, plus their own brand Germ-X, was completely stripped out, like, there is no way they could keep up with demand for the retail space. That gave us a huge opportunity.

There's a bunch of other people that realized that opportunity as well. The reason why SoapBox was able to succeed while many of these smaller brands were not, is because we've been in the business for 10 years. And when we made that commitment, we said, hey, we're going to ship on-time, they were like, I trust you, because I met you at trade shows, you're already a vendor, you know how to shift my DCs, so on and so forth.

Hill: And it sounds like, [laughs] going back to the start of SoapBox, you start with the mission in mind, it wasn't like, you and your buddy got together, crunched the numbers and said, soap, that's a profitable business, there's an opportunity, but it sounds like, in the intervening decades, you and he and the other people on your team, actually did put in the [laughs] due diligence on, not just making the packaging better, the branding better, all that sort of thing, but starting to look into, OK, what other products are there? You know, going into shampoo, that's an obvious move. Looking into hand sanitizer, so that you actually had the business side of it, if not completely locked down, you were certainly [laughs] starting from a point of greater intelligence and greater knowledge than you were at the beginning of SoapBox.

Simnick: Absolutely. We just continued to sail forward. So, like many founders, especially first-time founders, will tell you that, can you learn from your failures before said failures kill your baby? Which that sounds incredibly drastic, and it's not meant to be as such, but the analogy is, can you have that iteration cycle go faster than the mistakes that you made, really hurting your company and/or your profitability and/or even the livelihood of the brand?

And I think one of the interesting things about SoapBox is, we just, at decision point after decision point over the past 10 years, refused to give up. And Dan Doll, who runs our whole supply chain and operations and product development has -- it's funny, like, don't take my word for it, like, there are industry trade magazines that have called this the supply chain miracle, because unlike other brands that buy a finished turnkey item from a potential supplier, we actually sourced pretty much everything for the cap-and-fill facilities that were creating these hand sanitizers for us. That's not normal, right? If we were to go to one of our supply chain partners and say, hey, can you make this? They'd be like, yeah, I can, I don't have the bottles, or, yeah, I can, I don't have the alcohol.

So, then we went into the business of sourcing a lot of those raw components. And the hysterical stories I have, Chris, of people like, fly-by-night trying to sell us fraudulent alcohol or -- no, seriously, it's one of the reasons why so many people --

Hill: I was just going to say, like, as you're talking, I'm thinking to myself, where does one get a truckload of alcohol so that you can make truckloads of hand sanitizer?

Simnick: Corn. [laughs] So, the simplest way I can say is ethyl alcohol, corn. And America has got a ton of it. What is interesting, and this is a little inside baseball, the reason why so many hand sanitizers smelled so poorly or just really bad at the early days of COVID, is because not enough of that ethyl alcohol was up-spec'd to USP grade or pharmaceutical grade. A lot of it was either meant as fuel, which people stopped driving as much, so therefore, they diverted a lot of that ethyl alcohol into hand sanitizer. But the problem is, it smells like ethyl alcohol, and it smelled really bad.

And we had a couple of batches go out that smelled like bad margarita mix, it was a bit much. Thankfully none of the stuff we make now is anywhere close to that. But we became a top hand sanitizer brand in the United States, we still are. And that to me is -- look, the SoapBox story of how we pivoted really can be boiled down to persistence and relationships. And that is -- I've listened to so many other consumer product entrepreneurs, who are like, hey, this is not a tech start-up, you're pivoting a tech start-up, you can come up with a whole brand-new company over the weekend if you want, because your end product is zeros and ones. With CPG [Consumer Packaged Goods] now, your product is on someone's shelf, and either you have to pay to get that removed or you got to wait till the next reset, which oftentimes, those are planned out 8 to 12 months in advance. So, now you just keep on working back the calendar. So, if you want to pivot, oftentimes things take a year or two.

So, for us, it was a consistent belief that our mission was valuable enough to consistently be in the trenches and build this brand. And thankfully, we've always made a phenomenal natural product that consumers really love. So, we just built the base of the following that really love our brand. And now, like, it took us 10 years to donate 10 million bars, Chris, this year alone, we're going to donate well over 10 million. Like, it's just, it's insane.

And I'm so grateful to work with the amazing team that we have, and also, all the amazing partners that we have. Like, I could run through a laundry list of all the retailers that are just phenomenal people to work with, both, on the buyer side as well as everyone down to a clerk checking out, just a wonderful team effort.

Hill: So, one of the things that we've talked about on this show, over the past few months, when it comes to consumer goods, and in particular, the consumer retail industry in America is, the ways in which, to varying degrees of success, different national chains have innovated, have been able to meet their consumers in ways that they hadn't before, from grocery stores to enormous bricks-and-mortar retailers like Target and Walmart. What have you seen from your position? I mean, I can come at it from the standpoint of just a consumer and an investor, for someone who's in the business that you're in, what have the last four months been like in terms of essentially the mad scramble that all of these different businesses have been trying to undertake?

Simnick: I think that there are regional superpowers, like Publix, like, Meijer. Meijer is a current retailer; H-E-B owns Texas, current retailer of SoapBox products; Wegmans powerhouse in the Northeast as well as Mid-Atlantic, current retailer of SoapBox. I promise this isn't a plug. Hy-Vee, same thing with our products, in Iowa and the Midwest. They are innovation labs that the Targets and the Walmarts learn from. Even Amazon will look at what Wegmans is doing to provide just a phenomenal experience for this customer.

And I think what's so fascinating is seeing how all of them learn from each other and evolve, and it's happening faster and faster. And none of what I'm about to say is going to be truly insightful because what was 20 years ago or 30 years ago, the veterans that we have a part of our team are like, buying used to be about relationships, now buying is much more about data, and about, are you trading up the consumer. When someone buys a SoapBox product, thankfully, one, we have double loyalty than the category average. So, we know that our mission on "one for one" isn't the reason she buys this the first time, it is absolutely the reason she buys us the second, and the third, and the fourth time, which is phenomenal. Because when I'm able to go to a buyer and say, hey, I'm giving you better margin, we're able to do a lot of great work together in the world, as well as, I have stickiness that's going to drive a customer back into your doors or back on your website or order through your distribution; that's phenomenal, right?

And the other thing is that I know for a fact that I build the basket, so SoapBox products have a far higher basket ring than other products. So, when I bring that consumer into their door, I have a more valuable customer to them. And that, like, the ability for me to slice-and-dice that data in every different angle, even still brick-and-mortar, right, you'd oftentimes think that that's only happening with online retailers, in which there is more access to data. But I would say that brick-and-mortar has quickly caught up on that. And what you can glean from IRI or Nielsen is phenomenal, especially any of these, most of your listeners probably already know this, but any of the rewards programs, they know pretty much everything about you. And as scary as that is, from a vendor standpoint, of what I am to those retailers, that's phenomenal, because I know what you buy and I know why you buy, and I know that if you buy one of our products or one of our competitors', I know how to switch you over to us.

Hill: Another thing we've seen over the last few months is, obviously, the major consumer goods companies, they want to work with the major retailers, but we've also seen them pivoting to essentially beef up their own e-commerce efforts. I mentioned a couple of times, Pepsi [laughs] coming out with Snacks.com and just saying, hey, yes, we want you to go to the grocery store and buy Frito=Lay products, but you can also buy it directly from us. How big a priority is it for you and your team to get people to go to your website, or at this point in time is that just not high on the priority list?

Simnick: So, Chris, phenomenal question. B2C is so fascinating, and as a "challenger brand" -- that's a funny way of saying we're small. [laughs]

Hill: It's a better version. [laughs]

Simnick: Hey, we're a top 10 sanitizer brand in the United States, but still a challenger brand. What is fascinating to me is B2C is about shipping weight. Like, if you're a consumer brand, shipping is everything, because consumers have been trained by Amazon that you're getting your free shipping, and if I'm shipping you a liter of shampoo, there's no way I'm making money at the price point that I want to sell to you at.

So, we charge, we eat half the shipping, so like, we just basically, anytime someone buys anything off our website, we're like, hey, our pledge to our consumer base is that half of this is on us. So, the margins that I deal with already are pretty tight, because we want to be a natural, but yet accessible product, so we want to be pretty close to Dove and pretty close to Softsoap. Like, we want to offer a better product that's paraben-free and EDTA-free and free from dyes and other different colorants. We don't test on animals. All these things that are near and dear to our heart, but yet, we also don't want to have a price point where a consumer goes, eh! I'll just go with the standard thing that my mom bought and my mom's mom bought before that.

That being said, what we have seen [laughs] is our B2C has just blown up, because sometimes consumers don't want to leave, the moment we put something on Amazon, it sells out faster than we're able to replenish it. And we have such a loyal base that's going to our site. I think it is smart for any brand to think about how you incorporate your own site and your own direct-to-consumer from the very get-go. And even if you don't have the economics to support it, you still need to be directly communicating with your customer. So, for us, our site is more informational about the brand and then we also offer her/him the opportunity to buy from the brand. But I think, for us, it really comes down to, I am shipping liquid from here to all over the country and that is very expensive and there are consumer expectations on that.

Hill: Two more things and then I'll let you get back to your actual job. I've been saying for a while on this show, with respect to Clorox, even though I don't own shares of Clorox, I cannot fathom that Clorox is [laughs] not going to do more business in the next decade than they did in this past decade. Without revealing too much, because obviously you're a private company, when you look at the next couple of years, is it all about the hand sanitizer?

Simnick: So, everything we sell is up double digits, most everything we sell is up at a SKU [Stock Keeping Unit] level, we have 120 SKUs now. So, we launched over 30 SKUs in three months, which for any of those who know consumer, that's insane. Everything has exploded. And my favorite line to people who understand finance is, we will do more in profit this year than we expected to do in gross revenue.

Hill: That's a good line. [laughs] It's even better when it's true.

Simnick: It's crazy, Chris. So, there have been some people who have come sniffing in terms of our interest and we welcome those conversations. Being a private company allows you a lot of flexibility, we have amazing shareholders, mostly family offices that have backed us and our mission from the get-go. And what I say, like, the future of where we're going is, we want to focus on creating natural products that are incredibly efficacious at making people truly healthy and safe. And that is our future.

So, where we see SoapBox going is continuing to build long-lasting and sustainable relationships with our retail partners, both offline and online. We've expanded into numerous other different channels. So, I was talking about the office channel through Essendant, as well as Staples and a bunch of other customers. I was talking about the growth into food service. There's a couple of customers that have actually preferred that I do not name them. There is rapid growth in retail.

What's so interesting about retail is, you can just look at IRI or Nielsen, and it's basically a scorecard for the whole industry, and it's truly fun to be able to see a hockey stick and then know that anyone in this industry can see that same hockey stick. So, that's been fun.

But for us, it's also, it is so refreshing knowing that one extra unit that we sell is not just one more natural product that we're able to offer our customers, but it also is one more unit that we can donate to our aid partners. And especially right now, as 501(c)(3) and charitable efforts have really taken a hit on the amount of donations that have been coming through the door, we've been able to step up big-time with them. And say, look, your hygiene implementation budget, we got it, and we can actually double it or triple it. And that has been the best part of the job.

Hill: Last thing. Separate from all the work you've been doing over the past four months, what are you doing to stay sane during the pandemic, or is there something you're watching on Netflix, or is it yoga, is it crossword puzzles, what are you doing to take your mind off of work, to the extent that that is even possible?

Simnick: The running joke in the office is that, no one here has slept for a couple of months. We think that there are incredible opportunities at hand, that a moment like this only comes one time, maybe twice, in a company's history, and it is an absolute privilege and delight to just continue to work at building this so that we can do more good. There's a bunch of new products that we're launching in the coming weeks, there's a bunch of new retailers that we're launching in the coming weeks, we're incredibly excited about what this means for our brand. I mean, more excited about what we're going to be able to offer to our customers as well as our aid partners.

Hill: Yeah, I guess you can catch up on Tiger King at any point.

Simnick: You know, I feel like I've seen it. I haven't, but I feel like I get it. And the other is, and once again your listeners can do this, I have the whole little man bun thing going, and also, I have blond hair. So, when I let my hair down, and if I wear a trucker hat, man, that is dangerously close, dangerously close to a gentleman by the name of Joe Exotic.

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Hill: Yeah, he's not wrong about that. I know this is audio, but you're going to have to trust me, he can pull off that Joe Exotic kind of look.

Seriously though, if you want to learn more about the company and its mission, you can go to SoapBoxSoaps.com.

As always, people on the program may have interests in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear.

That's going to do it for this edition of MarketFoolery. The show is mixed by Dan Boyd, I'm Chris Hill, thanks for listening, we'll see you tomorrow.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.