How “The Plug” powered their pivot

When brothers and entrepreneurs Justin Kim and Ray Kim, co-founders and co-CEOs of The Plug, set out to start a business, they knew they had to land on a great idea, find investors, lean on mentors, research the industry and devote huge amounts of their time and energy into building a company. What they didn’t expect is the need to shift their whole business model just a few years into their growth.

We sat down with Justin and Ray to talk about how they got their start building The Plug, the financial challenges they faced—and ultimately, how and why they made a pivot in their business to unlock success and profitability.

The Kim brothers decided to start The Plug as a recovery drink for people to consume after drinking alcohol. Although they grew up in southern California, they spent a lot of time in South Korea, where their parents are from. During nights out on several of those visits, the brothers discovered that hangover recovery drinks were a huge and profitable industry in the country—and could be an untapped market in the U.S.

Because of their family heritage, Justin and Ray had unique access to traditional South Korean herbal remedies that have been around for centuries and have been shown to naturally help flush toxins from the liver. What’s more, they were able to tap into their father’s expertise as a serial entrepreneur and his experience in international business to help get their recovery drink idea off the ground.

Said Ray, “We saw a couple competitors launch in the space, and we just thought we could do a much better job on all fronts, leveraging our father's background, too.”

In 2019, the Kim brothers launched The Plug Drink, their own spin on a functional recovery drink that could help people feel better and bounce back more effectively after drinking alcohol.

With Justin handling the financial side of the business, and Ray leading the charge on new ideas and product development, they both agreed that their different skill sets truly complement each other—and make for a more balanced and productive work environment.

Ray talked about the benefits they each bring to the table, saying, “I steer the ship...and my brother makes sure it doesn’t sink, so...no matter what, we’ll always have each other’s backs.”

Added Justin, “We're very similar, but we think very differently in terms of working style. I think that's been very helpful in terms of launching the business. And that's what helped us not fail in this company. That's what makes (working together) seamless and easy for us. We’re the yin to each other’s yang.”

In the early days of building The Plug, Justin and Ray were both still working at their corporate jobs, but stayed busy testing product formulations, raising capital, developing marketing strategies and getting entrepreneurial support from their father. They also decided to hire a highly regarded social media agency to help with e-commerce needs—an area in which both brothers admitted they didn’t have a lot of experience.

Said Justin, “We thought that, oh, you go viral on Instagram, and have a good website, sales will start going up, right? We didn't even know about things like ads or email campaigns or SMS. We thought having a good social media agency was the route (to business growth).”

However, in February 2020, just four months after launching The Plug, the brothers discovered they were quickly running out of money. Even though the business was growing slowly, it was not generating enough sales to offset the $10k a month they were paying the agency.

Justin realized the company had already used half of its existing funds—and they had to make a change, or the business would fail, saying, “I was just looking at all the outflows every month, every day...actually. I was looking at the bank accounts and just seeing them dwindle. At this rate, we're going to be at zero in just a few months.”

Ray added, “We only had four months of runway left before being totally out of cash and out of business. We needed to get smarter about how we were spending. When we looked at the books, it looked like we were paying a social media agency $10k a month, and that was not generating any sales. So...we decided to roll up our sleeves and bring it in-house.”

To replace the agency, the brothers developed a social media internship program of college students who had proven skills in the areas for which they needed the most help, such as graphic design, copywriting, TikTok, Instagram, photography, videography and UCG (user-generated content). With Justin’s background in headhunting, he was able to find and hire 30 students to work for The Plug within a few weeks, offering college credit in exchange for the students contributing valuable social media skills to help raise awareness of the brand.

After several years of marketing The Plug Drink as a hangover recovery supplement to a younger audience through bar events and digital advertising, Justin and Ray made an important discovery about who was really using their product—and why.

In 2021, the brothers were doing road shows (product sampling) at Sam’s Clubs, and kept getting approached by older shoppers, who were curious about another benefit of The Plug Drink: daily liver health. Many of these people recognized that the 13 proprietary herbs in the product were ones that they were already taking in various forms to treat chronic conditions like fatty liver disease.

The interest and enthusiasm from this older audience became a lightbulb moment for Ray and Justin, who then took a closer look at who was actually buying their product online. Said Justin, “When we first launched, we were marketing to the younger demographic, and we were shocked to see that 80% of our sales were coming from the older demographic...mainly for daily liver health benefits. It was a total a-ha moment for us.”

The brothers dug deep into this new finding and conducted a clinical research study that showed that The Plug Drink helped improve liver function and suppress liver cell damage in just seven days. They said that results included significant reductions in AST and ALT levels and also reductions in total cholesterol and LDL cholesterol levels—major findings that shifted the whole focus of their products and their marketing.

Justin and Ray realized that they needed to center their products around liver health instead of alcohol recovery, with Justin adding, “As entrepreneurs, sometimes you get so focused on making the product that you lose sight of who you’re supposed to be selling it to.”

Once they made the pivot to promoting daily liver health, everything changed for the better, including their profits. Justin said that their earnings jumped from $1M in 2021 to $5M in 2022—a growth of 400%. Speaking about the shift, Justin shared, “From that point onward, 80-90% of our online sales were from people wanting daily liver health supplements, and now just 10-20% of our sales are hangover-related.”

These new findings not only increased sales of the drink, they also inspired the brothers to create a pill form of the supplement, with Justin adding, “To better serve our newfound audience, we even developed The Plug Pill, which gives the same benefit of the drink, but in capsule form, for greater convenience.”

One of the ways the Kim brothers were able to make such a large business pivot was by partnering with Capital One Business, who provided The Plug a no-preset spending limit card. This critical financial support helped them open up new opportunities to keep business finances moving as fast as their business operations.

Justin said that the flexibility of the card allows them to move faster and more fluidly, adding that “Capital One Business gave us a line of credit that facilitated the pivot.” He also said that the 2% cash back option has helped give The Plug additional financial leverage.

“When you’re spending over six figures every single month, 2% cash back is crucial. We actually use it a lot for our office supplies: paper, tape, folders, etcetera. So it’s been really handy...We needed that cash to make sure our voice would be heard in a very competitive marketplace.”

Ray noted that the Capital One Business card helped them expand their marketing options, saying,  “The no preset spending limit is what allowed us to funnel money directly into digital advertising...which definitely helped us get our name out there...It’s our main growth driver.”

Both Justin and Ray are thankful for all the lessons they’ve learned over the last few years—and for the courage they’ve had to stay open to pivoting along the way.

The brothers are proud of the new communities that have embraced their products and been a part of The Plug’s successes. The company’s newer clinical research findings and science-backed results have opened a lot of doors for the brand as a medically based supplement, with Justin adding, “We now have 1,200 clinicians who have endorsed us...and we’re now FHA and FSA-approved.”

Ray concurred with the duo’s positive outlook for the future, saying, “Building an empire with my brother...We’re really excited about the growth ahead.”

How can Capital One Business help you make the shifts that make business work? Learn more.