Stoel Rives | Deeply Rooted Podcast S2E1: Growing a Community-Focused Brand During a Pandemic with Katie Poppe, Co-founder and CEO of Blue Star Donuts

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In the season two premiere of the Stoel Rives | Deeply Rooted Podcast, Katie Poppe, Co-Founder and CEO of Blue Star Donuts, and Kristin Russell, a finance attorney and member of Stoel Rives' agribusiness, food, beverage and timber industry group, discuss:

• The challenges of adapting and growing a business during a pandemic
• Managing stakeholder relationships
• Sustainably growing a community focused brand

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About Stoel Rives | Deeply Rooted Podcast

This season, our hosts are interviewing respected industry leaders and discussing how they, and their companies, are embracing innovation and capitalizing on new opportunities to move their industries forward in an ever-changing world. The first three episodes will be hosted by Claire Mitchell, Merissa Moeller and Kristin Russell of Stoel Rives’ agribusiness, food, beverage and timber industry group.

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Episode Transcript

Kris Russell

Welcome to the Stoel Rives Deeply Rooted Podcast. I’m your host, Kris Russell. A finance attorney and member of Stoel’s Agribusiness, Food, Beverage and Timber Industry Group. This season we’re interviewing respected industry leaders and discussing how they and their companies are embracing innovation and capitalizing on new opportunities to move their industries forward in an everchanging world. Subscribe at stoel.com; that’s s-t-o-e-l.com or wherever you listen to podcasts.

Greetings, listeners. Welcome to this episode of The Stoel Rives Deeply Rooted Podcast. I’m your host, Kris Russell. Our guest today is Katie Poppe, co founder and CEO of Blue Star Donuts, the purveyors of my absolute favorite donut in what’s in my humble opinion, the best city these days for donut fans.

Katie is a restaurant entrepreneur who has been behind a variety of successful and popular local food concepts with several of those brands going on stretched beyond Oregon’s borders. Blue Star Donuts is based here in Portland, and they’re donuts for grown-ups, although my daughter would argue with that description. Are not only available in informed café locations in Oregon and California, but also in a shelf stable product range via local retailers like Market of Choice, Green Zebra, Alpenrose and New Seasons. And recently they’ve expanded to include a selection of full-sized donuts available for nationwide shipping. In this episode, Katie will be discussing the challenges of growing and adapting a business during a pandemic, managing stakeholder relationships, and sustainably growing a local community focused brand. Katie, welcome to the program.

Katie Poppe

Hey! What’s up girl?

Kris Russell

How are you doing today?

Katie Poppe

I’m doing great; I’m doing great, and I would also, just let your daughter know that donuts for grown-ups and not so grown-ups alike.

Kris Russell

I think she doesn’t care about the labeling. She just gets obsessed with my…

Katie Poppe

She’s a little opportunist.

Kris Russell

…the raspberry. She’s like…

Katie Poppe

Is it? Really.

Kris Russell

Oh yeah, no, she’s obsessed.

Katie Poppe

Raspberry rosemary buttermilk?

Kris Russell

Raspberry rosemary buttermilk.

Katie Poppe

She’s quite the adult flavor.

Kris Russell

She’s like, she wants it. No argument. There’s no like choice…that’s never the one that we get…

Katie Poppe

Can’t blame the lady for good taste.

Kris Russell

So I wanted to start off by talking a little bit about where you’ve come from in growing the business and the importance of local relationships to what you’ve built. Could you talk a little bit first about how you got to Portland and what you’ve done to get to where we are today?

Katie Poppe

Oh, you mean like my background life story in five seconds?

Kris Russell

Yeah.

Katie Poppe

Oh gosh. Well, I’m a dreaded Californian.

Kris Russell

Dun-dun-dun.

Katie Poppe

I know. Dun Dun Dun. But I’ve been in Portland for 18, 19 years. I married a native man. And my background actually is neurological psychology. Totally random, I know. I honestly just kind of fell into the restaurant industry. And yeah, I’ve talked about this before. I’m not a chef. That’s not my, I love good food. I absolutely love it and it’s actually kind of … my dad traveled quite a lot for business and he would always bring back, he was really curious and he loved learning about different cultures and different food. So growing up he was always exposing us to different culture food and explaining, you know, why good quality food was so important. And it was just part of my family experience growing up.

Kris Russell

That’s awesome!

Katie Poppe

Yeah.

Kris Russell

And you’ve actually spoken about good quality food and how since your days back at even like little Big Burger, one of your core ideas was to build off those quality ingredients and the bounty of the Pacific Northwest.

Katie Poppe

Yeah.

Kris Russell

… and all the amazing local suppliers we have in the region. So could you talk a little bit about how you’ve developed and maintained those local connections at Blue Star …

Katie Poppe

Sure.

Kris Russell

… and what you look for in those supplier partners.

Katie Poppe

I mean, Oregon is amazing. We have just an absolutely phenomenal quality of everything from the sea to the farm, the fields and we’re a huge agricultural export to Japan and Asia. Actually OPB just did a series called Superabundant and it’s focused on Pacific Northwest bounty. Everything from like we’re a huge unit exporter. Sea urchin. And, you know, what that is all about to wheat. And you know the Pacific Northwest high quality wheat. That’s one of our biggest exports.

Kris Russell

Yeah. I actually hadn’t realized quite how many acres of Oregon were planted in wheat until we started working together and I was looking into Blue Star supply chains. And it was like, oh, there’s actually really, really great wheat being grown in 700,000 acres of Oregon now.

Katie Poppe

It’s crazy. I know. And Oregon and white truffles. Some of the most prized truffles in the entire world. So there’s just, all the raw material is here, right? And Blue Star started honestly kind of as a vanity project. You know, it really was. It was like let’s just make the absolute best quality donuts, you know, out of the best quality ingredients we possibly can just because I want to eat it. [Laughter] And we have all the raw material here, like let’s use that. And I did not think it was going to be … It was just kind of a one off. It was like let’s just make the absolute most indulgent best donut we could possibly make. And the response to it was just, I think, a lot of it was maybe right time right place. But yeah, just the customer response, the staff response ,everybody involved. Something about it just had that mojo, you know. That je ne c-est quoi. And so growing it over the years has been interesting because the business model wasn’t designed really to scale initially. Like how do you scale a super bougie donut concept? It’s really hard to make. And thinking about you, know who, we partner with over the years. There’s a lot of very intentional decisions behind that because is it a lot easier and more business savvy to go with lower quality ingredients that are cheaper? Absolutely 100%. But that’s not what I want. That’s not what our customers want. And so figuring out like how can we pair our core values with the local producers and artisans that we want to work with? You know, that’s been, that’s always a work in progress. But that’s what we come back to time after time is, you know, do the people we want to work with match our core values as a company and our core values are donut party every day. Own it, you know, take responsibility. No drama. Unique passion for quality. Together or better. Stellar hospitality. That’s an acrostic, KIDS, by the way.

So when we look at who we want to work with and who we want to partner with, do they connect with our core values? Are they living those same core values? And that’s really, that’s why we partner with who we do at the end of the day.

Kris Russell

Nice. And you know it’s not just those sort of staple core ingredients that you’re really developing these partnerships with. You’ve done a lot of really cool two way partnerships with other local businesses.

Katie Poppe

Yup.

Kris Russell

Could you talk a little bit how those relationships in particular develop, like how you come up with those pairings and cross promotion opportunities. Like, is the partner first or the project?

Katie Poppe

It’s actually kind of a combination. So for example, a coffee, right? I mean donuts and coffee; You’ve got to have good coffee. And we were at a point where we wanted to elevate our coffee game and use somebody, you know, Portland local that combined with our values. And so went around to the local coffee people that we really respected and asked them to come up with a unique blend that would pair with our donuts. And the thing about our Donuts is, you know, raspberry rosemary buttermilk. That’s not a super basic flavor.

Kris Russell

There’s a lot going on there.

Katie Poppe

Yeah, and we do donuts. We’re not artisan coffee makers. We’re artisan donut makers. And so people aren’t coming to us for super artisan frou frou coffee experience, right? They’re coming to us mainly for the donuts. So what we want in our coffee is something that’s not necessarily going to compete with the donuts. But it’s also going to complement it and cleanse the pallet so that it’s refreshing your palette, preparing it for the next bite of whatever fantastic donate ________. So we went around to a bunch of different concepts locally and asking to come up with a special blend with this in mind. And then we did a blind taste test. So all of my upper management team, we had narrowed it down to these three companies and we did a blind taste test. This is like the best day of my life, by the way.

Kris Russell

I was going it sounds like donut party every day, right? The best party.

Katie Poppe

Yeah. And it ended up that Coava Coffee Roasters, Matt Higgins, was just kind of far and away the best match. And that to me was an example of the project is coming first, but we’re going to pair it with, you know, our values and how we want to go about that. And also there are people that are partners we want to work with. One Stripe Chai. And she and I kind of met very serendipitously. I was like, “This chick is cool.” She’s got, she’s cool. She’s going her own thing going on and she’s making it happen. Her product is fantastic. Like, let’s find a way to do some kind of a really cool collaboration, whether it be a drink or a donut. We also use quite a lot of different drinks, beverages in our donuts. And so One Stripe Chai, we made … she worked with chef Stephanie and our Executive Pastry Chef and they came up with our Peppermint Chai Chocolate Donut. That’s a holiday staple. I mean it was just kind of like a one-time limited release and people went bananas over it. And so now it’s like we make our donut bites. We make our chai donut bites. We have the chai cake donut that comes back. And that was great.

And I mean Shine is actually, that’s a friend of one of our upper management team members, John and he is just … I mean that guy is entrepreneur to the nines. He has pulled some extremely ballsy moves and I have nothing but respect for the man and his product is absolutely fantastic. So it was like we have to find a way to make this happen and they just kind of like came up with this happen. And they just kind of like came up with this. They were like, what do you think? We were like, “This is amazing.” “Yes, yes, please. Thank you.” And apparently, it’s been doing well enough for them to keep it in stock.

Kris Russell

Which is great.

Katie Poppe

Yeah, yeah.

Kris Russell

And you talked about some of your senior management who are still there and have been with you this whole ride …

Katie Poppe

Yeah.

Kris Russell

… and that you know you’re grown local model sort of extends to that team. Like a lot of your original staff have helps grow the business while growing in the business. And you know you’ve been consistent about wanting to make sure they were taken care of. You know, we met last year while going through the Subchapter 5 bankruptcy process that Oren was guiding you through. And I just wanted to get some of your thoughts on, you know, how did that process work for you in terms of keeping that core team together and sort of happy?

Katie Poppe

Yeah, that’s an interesting question and I will, to me I think when I look back on that, it was a blessing in disguise because going through it was hell. I mean it was… thank God for Stoel Rives. I mean, I just as in a side note, you know I’ve worked with Stoel for eight or nine years over, you know, across all my different companies, across a variety of different subjects and topics. And not only are you all some of the sharpest and most creative minds in the business, you’re also some of the most staunchly ethical people I’ve ever, ever met or worked with. And again, it’s that alignment of core values, right?

Kris Russell

Mhmm.

Katie Poppe

And I think we could all certainly not say that about all lawyers. But that’s been, my experience with Stoel. So I have a lot of trust built up over the years. And I trusted Stoel to help guide me through this incredibly stressful, you know, discombobulating experience that was born out of desperation because of the pandemic. And you know, for me with Blue Star, something that I’ve learned with companies is … it’s just I want to make sure that credit goes where credit is due. And that’s not always the case. A lot of the times when companies are set up the people that are doing the sweat equity, the blood, sweat and tears that are there at all hours of the day, 2:00 AM, doing whatever it takes to keep the doors open, they’re not necessarily getting the ownership stake. They’re not necessarily getting the back end benefits. And that is something that doesn’t sit right with me. And again, you know, Blue Star the way it was set up initially I didn’t really think about that. I didn’t, nobody knew what it was going to become and it just became something totally different. And as Blue Star became more popular as it grew, you know, to me there was this glaring difference between the ownership back end and the people that were actually making it what it became and what it’s become. And I just kind of decided, like, I have to make this right. This is not sitting well with me. I played the long game. That’s always kind of been my strategy. And I knew that this was going to be a long, long ride and so, a lot of people don’t know this, but just on the back ends, pretty much since the beginning of Blue Star I’ve been working to right the ownership stake over the years. And it’s a long kind of nasty process to be honest. I mean, nobody wants to give up something that’s successful and popular. So it takes just a lot of patience and a lot of skillful negotiation. And the pandemic and just what happened with the fallout with that, unfortunately, you know, just the all the pandemic situation and the government regulations combined with kind of a nasty, litigious landlord, unfortunately drove us to pursue the Chapter 11 bankruptcy protection. And which for me was like, you know, I think most people when you hear bankruptcy, everybody just thinks of what I now understand is Chapter 7 liquidation, right? You’re going out of business. But in reality…bankruptcy…there’s a lot of different varieties of it. Chapter 11 and the new Subchapter 5 category is just a different flavor, you know, and so that was a big education for me and an opportunity to restructure the company.

And so hey, here’s this opportunity unfortunately born out of crisis, you know, for us to find a way to attract some new investment. And also let’s give the people that are actually running a company and making the mojo that is Blue Star, let’s let’s give them a right side stake in it. And I fought really hard for that. You know, I basically said like, “No, I will walk away if that doesn’t happen, I’m OK with that. This is something that’s really important, and if it does not happen, the company will never be the same.” So yeah, it was a long dirty fight, but I had Stoel by my side and luckily it worked out and I’m really proud of that.

Kris Russell

And I’m sure you’re a little bit relieved to not be talking to us quite as much this year. [Laughter]

Katie Poppe

I mean not in that way. I miss you guys. . I do. I feel like we all kind of bonded over that. It’ll be all look like super early and super late.

Kris Russell

Yeah, yeah. No, it’s the combination I think of doing a really high stress project, during work from home, during pandemic.

Katie Poppe

Yup, yup.

Kris Russell

It’s like, “Well, I really hope you like the real me because that’s what you’re getting.”

Katie Poppe

I mean, and I’ve talked about this with other people, but there are very, very few people in this entire world that will ever understand what we went through besides our immediate families, like our spouses and Stoel. I mean you see people at their absolute most desperate times. And that’s something that I will never forget.

Kris Russell

On a, you know, slightly different note, but also tied into the pandemic and coming through that whole process, you know, you worked so fast to pivot and respond to this, you know, very sudden shutdown, trying to keep your employees safe, trying, you know, having revenue go to zero and then developing this whole pivot to the grocery shelves and developing a new product while going through this process with us, while dealing with your landlord. How did you manage that while dealing with everything else you were facing? And how do you think that’s, you know, continued to go into your current delivery expansion? Where do you see that going, even?

Katie Poppe

There’s a lot of questions in that question.

Kris Russell

Yes, there were.

Katie Poppe

I’ve had kind of a crazy life and I guess my response to stress is to fight it through it and I’m very fortunate in that I belong to a global industry group of other restauranteurs around the world. And as the pandemic was unfolding, I was paying really close attention and getting reports from the front line what was happening in Asia and Italy and I just knew it was going to be bad here. Bad for our industry, that the industry was going to take the brunt of it, that the government response was going to be a clustered.

Kris Russell

And interesting.

Katie Poppe

Yeah, and we were just going to go through these waves of openings and closings and shutdowns. You know, and at the time the Blue Star business model was 100% in person retail. And if you take that away, you know, we were almost a $7 million business. You know, I’ve got eight shops in Portland and almost 100 staff. Like, how are we going to keep that going? So I went into panic mode. And one of my restaurant buddies in Texas told me this story right around that time. We were all kind of talking about like how to handle this and what we’re going to do with their businesses. And he said, Okay, so there’s this story that on the Colorado plains there’s herds of cows, and there’s herds of buffalo. And when a storm rolls in, you know, they can smell it. They could smell the storm coming. And the cows smell it and immediately as a herd they turn and they start running away from the storm because they’re panicking. Cows aren’t that fast. So the storm catches up with them. The cows keep running and they’re running while the storm is passing over, and they’re essentially kind of prolonging their exposure, and they’re suffering to the storm. Buffaloes, when the buffaloes smell a storm coming, they turn and they run towards it as a herd, and they run through the storm. And it minimizes the pain and the suffering that they ought to endure together.

And I heard that story and it just clicked like I want to be a buffalo. I want to be a buffalo. I want to minimize the pain and the suffering and just like, all right, what do we need to do to survive? And, you know, that first day we shut down, cleaned up the stores, donated everything we could, and I honestly the first day just cried my eyes out. I walked around the shops just really scared and panicked for what was going to happen. And then the day after that I woke up. I want to be a buffalo. What are we going to do? We need to get something to where people are going to be there. The grocery stores are going to be kept open. People have to have food. So what can we do to make our product translate to grocery stores? And so I called Chef and I said, “Hey, let’s get into the kitchen. Let’s do some R&D and see how we can come up with, you know, mini doughnuts or donut holes or something.” And so she immediately starts working on that. And I reach out to all my business contacts and get in touch with like those who are the head buyers of grocery stores. And I kind of fudged this part, but I was like, “Hey, we’ve got this brand new product. It’s shelf stable. It’s great for the bakeries. I could put you on the list, if you’re interested.” And they’re like, “Oh, yeah, sure, OK great.” And man, there was a couple people. So Lisa Sedlar, Green Zebra, Celina, she was a head bakery buyer at New Seasons. You know they were like, “Absolutely, yes. 100%. When can I get it? Yesterday like how do I…” And Chef ended up, you know, it turns out that our buttermilk old fashioned donuts and our cake donuts. They do really well with shelf stability with freezing and buying. And so we were able to make donut bite versions of our full-sized donuts. And come up with kind of like a freezing process so that they could be frozen and delivered frozen to grocery stores, pulled and thawed and put into the bakery sections. And we ended up turning that around in 10 days.

Kris Russell

Ten?

Katie Poppe

So from March 16th until I think it was April 1st, April 1st or April 2nd, we had product in the grocery stores because they took a chance on us. Yeah.

Kris Russell

And again, going back to that, you know, having those connections that people went to pick up the phone, the local network …

Katie Poppe

Yes. Absolutely. Absolutely.

Kris Russell

And obviously, having Chef willing to, you know, roll up her sleeves and get to work straight away.

Katie Poppe

Yeah, I mean I don’t think we knew how bad it was going to get at that time. But it was, I’m just so grateful for the community support. And, also, I mean, grocery wholesale is a completely different business model. I mean like groceries take 40% margins. That’s totally different than retail.

Kris Russell

Yeah.

Katie Poppe

And so trying to figure out how to make a business model out of this dynamic and learning that and figuring it out on the fly, that’s, it’s a lot.

Kris Russell

Especially well, you know, got nothing else going on to worry about. [Laughter]

Katie Poppe

Yeah, exactly. Yeah, and again it came down to those core people that had been with the company, those six people that have been with the company, some of them since day one. I mean Chef Stephanie, our Executive Pastry Chef, she was my first hire. She invented all the Blue Star recipes and those people that have learned different hats throughout the company throughout the years, they are the ones that helped save the company. In addition to our community, yeah.

Kris Russell

And how do you see that side of the business that, you know, you didn’t previously have going forward as, you know, you are reopening and things are … I mean, at one point I thought things were getting back to normal.

Katie Poppe

Yeah.

Kris Russell

Basically we’re still in that phase. You were clearly right with the reopening reclosing reopening reclosing. But you’ve clearly also been expanding on some of your shipping products now that you’re able to do this.

Katie Poppe

Yeah.

Kris Russell

You know, where do you see that going?

Katie Poppe

I mean the silver lining is that it unlocked a totally new revenue stream for us. We have this new line of products, the donut bites, donut holes that can be shelf stable and sold in grocery stores. We’re also in Legacy Emanuel, Alpenrose home delivery. We’ve expanded to Seattle, the Smith Brothers home delivery. So there’s just a world of opportunity with that. It’s a very different production process. But also just the freezing technology that we’ve kind of invented that works for us, helps us to ship our full-sized donuts nationally. So we’ve been doing R&D testing throughout this whole last year and a half and figured out how to ship our donuts nationally, which is fantastic, because everybody has always been asking us, you know, I want to send these to my friend or whatever or, you know, great gift, congratulations and now we can do it. And it’s awesome. And we’re so, so pleased with the quality and how it’s turned out. So yeah, we’re just doing kind of the soft launch right now, but it is fantastic.

Kris Russell

And I presume keeps happy some of those fans, like the guy who flew out for Donut Day to come and spend the day in Portland to go to all the Blue Stars.

Katie Poppe

Yes, yes. Yeah, absolutely. Now we can get the donut love to them. They don’t necessarily have to come. Yeah.

Kris Russell

So how do you look at the work of balancing sort of the local community side of the business and your core proposition while targeting that growth and growth beyond Oregon.

Katie Poppe

Yeah, yeah, I mean, you know, Blue star is back and better than ever. We have a lot of really exciting openings on the horizon and we have some plans for expansion in the West Coast. And one of our initial slogans when we opened was Quality Over Quantity. And the intention behind that was, you know, hey, we’re not going to use the cheap mass produced ingredients. We really want to work with the most best quality things that we can find to make the best quality product we can find. And that’s sort of the ethos behind Blue Star. But it’s not necessarily unique to Portland. There are local producers, artisans in every community, especially the West Coast. And so I would say that that mantra has changed or evolved to quality and quantity. So as we expand along the West Coast, you know, being very thoughtful and deliberate about the local producers, the local artisans that we get a chance to collaborate with, that we can use our platform to showcase. So that’s something that’s really exciting to me because I think Portland may have really kind of led the charge around that ethos. I see it taking root and I see that more people are paying attention to it, and they’re valuing that. And there’s just so many talented people all over the place and I’m excited to pursue partnerships with them, you know, to find that that kind of cross section between really high quality products and core values, you know, to make something that’s incredible and unique.

Kris Russell

Very cool, very cool. I can’t leave without asking one final question that I’ve been meaning to ask you for a year now, which was I watched you give a talk to an entrepreneurs group a while back where you mentioned the same thing you did earlier in this conversation about not being the cook and how, you know, most people have a signature dish. That’s their thing they bring out for company, video for the fancy dates. And you said yours was a snack plate? And I’m deeply curious what goes on to the snack plate.

Katie Poppe

It’s just cheese. [Laughter] It’s just … actually a friend of mine gave me this book a little while ago. It’s called That Cheese Plate Will Change Your Life and it’s kind of like a how to and how to put together like a super, you know, juju cheese plate and that’s now my signature move. I’m that person that brings the wow cheese plate, you know, the snack plate to the party. That’s my move, yeah.

Kris Russell

Are you doing like the little folding of all the …

Katie Poppe

Oh, it’s called the Salami River, actually.

Kris Russell

Oh yeah. Okay. You have your little, you know, river of cheese, and then you’ve got your little salami River nestled up next to it. And then you’ve got your crunch factor. You’ve got the herb factor.

Katie Poppe

Yeah, it’s a work of art.

Kris Russell

Awesome. What’s the favorite cheese? Is there like a cornerstone cheese that you just come from?

Katie Poppe

And we start from a bad cheese. I mean, no, there’s no bad cheese. Death by cheese. That’s how I would go out. Seriously, just like drowning in melted Brie or something. That would be a good end. Yeah.

Kris Russell

I like how this is, you know, somehow turned around into my other favorite podcast. But... Well, look, thank you so much for your time, Katie.

Katie Poppe

Yeah, absolutely.

Kris Russell

It’s always a pleasure to see you.

Katie Poppe

Yeah.

Kris Russell

Even now that you have to commute in to downtown.

Katie Poppe

Fair, fair. But yeah, this was great and I just had to say that working with you, Chris, you’re one of the most intelligent, curious people I’ve ever had the pleasure of working with. So thank you.

Kris Russell

Aw, and I didn’t even have to pay you to say that.

Katie Poppe

[Laughs] Actually I paid you.

Kris Russell

Yeah, no, like this was great.

Katie Poppe

Yeah, it was worth it. It was definitely worth it.

Kris Russell

Well, thank you. It’s great to see you always and hope to see you soon. Cheers!

Thank you for listening to the Stoel Rives Deeply Rooted podcast. To follow along and get additional insights from each episode , visit stoel.com. Please also take a moment to rate and subscribe to the podcast on Apple, Spotify or wherever you listen to podcasts.

The news expressed in this podcast are solely those of the individuals involved and may not reflect the views of Stoel Rives LLP. Participation in this podcast by any individual is not an endorsement of any view or opinion expressed. This is not legal advice and the podcast doesn’t create an attorney-client relationship.