Start-up Stories with Cynthia

EPISODE 12: CLIF BAR

Alright, first off I want to say that it's been a long time coming but I'm glad we're here. It takes a lot to actually define the best start-ups that truly represent some of the values that are very well needed at this time in building a start-up from scratch.

So today we have a very interesting company called Clif Bar. We are gonna be learning about how Gary Erickson turned his mother's recipe into a company that generates just over $500 million dollars in revenue.?

Every startup story is unique, there are so many reasons why I love this particular startup and I'll be sharing that in today's episode, so let's get straight into it.?

The Beginning.

In the early years of Gary Erickson’s life.?

He was working at a bicycle company, making bicycle seats. He also loves racing bicycles, and as a result of this, he went for a lot of these cycling mini-competitions.

Within those early years, he learnt how to bake from his mother and his grandmother and he was really drawn to that, so he started a baking business. He would bring these baked products for those competitions, his office colleagues and his peers. They absolutely loved it.

His mother used to make this very fantastic savoury pastry. He thought to himself, I could turn this into a business and he did!

He called it ‘Carly Sweet and Savouries’, he named it after his grandmother.?

The Unexpected Inspiration?

He was pretty much running that business in the 1980s.?

On this fateful day, he was taking a bicycle run with his friends. Just before he started the bike trip, he took with him about six packs of energy bars produced by a company called Power Bar (energy bars are bars that are supposed to give you energy). A few hours into the trip, just as he got to the top of a mountain about to come down, he was about to take another pack to complete the race but he just couldn’t, he couldn’t take another bite. He was weary of the product. The energy bar was chewy, hard etc. But then he said to himself, “I can make this”?

He completed his trip and called his mum and told her that he wants her to join him on a project to make energy bars. His mum was confused wondering what an energy bar was.

Simply put, an energy bar is a small bar of food that you need to make with no oil, no sugar, no butter etc. It also has to be crunchy. His mum was even more shocked saying “How is that even possible”

The Energy Bar Project Begins

He went on and started doing rounds of testing and experiments with his mother so that they could finalize the perfect energy bar.?

He did this for six months and he was testing the product with his friends who were also bicycle racers as well. For every rejected product that he brings to them, he would return to make another one. He used whole foods like whole sweeteners, rice sweeteners, natural sweeteners and fruits and all of that as an alternative for oils, butter, sugar or any other processed foods.

Eventually, after six months he arrived at a particular combination that really hit the nail on the head. He packaged and designed it with the help of his friend (this is the same design being used to this day.) He was thinking of a name to give to this bar, so the name that actually came to him was Clif, he named it after his father, Clifford Erickson. This was the birth of the name.

Turning a recipe into a marketable product.

It is one thing to make a product, it is another thing to market the product, to get people to keep loving it.

To be fair, he never really saw this recipe becoming this huge, generating hundreds of millions of dollars per year, he just wanted something simple, to be able to make enough money to manage himself and his business at that time but here we are today!

To make this product in mass quantity, he needed equipment, his current bakery wasn’t fully equipped to handle the quantity required to put in the stores.

So he reached out to a cookie bakery within his area and a packaging company. He secured a partnership deal with them. He didn’t have a lot of funds to pay these two companies, so he jumped on a credit plan where he would pay the companies once he was able to make a huge sale.

Production Done, Marketing Begins

So how did he market this??

He leveraged on bike races, he would go to these bike race events and start handing out Clif Bars to people. Telling them this new product called energy bar, he'd try his best to convince them and that was how he was able to sell. He also did like a small ad in a bicycle magazine and this Ad ended up biting them (Clif Bar) on the foot because it was like shooting shots at Power bar and Power bar sued them. That ad actually created a buzz.

It created a buzz and sparked conversations like who are these new guys hitting at Power bar? like POWER BAR do you get? And that was how he was able to market it.?

For marketing, he leveraged majorly on word of mouth, stalls on bike races, the magazine ad etc.

He didn't take a lot of outside investments, well he had his own personal reasons. He said once taking outside money is like running a race where you're no longer in charge, you're more or less under the pressure of other people.?

So it was really word of mouth that really pushed the brand. This was also coupled with the fact that it was such a fantastic product. People loved it, it tasted good and it performed the function.

The insights of being a user of the product as a bicycle racer influenced the final product. He was also working at a bicycle making company. He was always around his target audience, talking and sharing the value of the product.

2 years into the company, he was generating? $700,000 per annum. He had begun distributing to stores around the area.

Later years of Building the startup.

Now, we are gonna talk about two events in his life that made a massive impact on what the business represents.

The first event:

He entered into a partnership deal that almost cost him his entire company. He entered into a partnership deal with a distributor but this distributor wasn’t performing well. So he decided to cut ties with them. This was around the early 90s. The distributor fought back and sued them for ownership. This lawsuit cost them a whole lot majorly because he got into a handshake deal with the distributor. He did this because he didn’t have the right counsel. He had to have a loan from the bank in order to settle it.

There is a huge lesson here for startup founders, don’t go into any partnership blindly. Seek counsel on how to execute any deal be it a VC deal, distribution deal, customer terms and conditions etc. Don't just copy and paste, seek the right counsel from the right individuals.

The second event:

So let's talk about the other important event in his life. In the year 2000, Gary received a very enticing offer that actually cost him $60,000,000 dollars.?

8 years after the launch of Clif Bar, they had seen a lot of growth generating up to $40,000,000 dollars in sales per year. He had also taken on a partner who owned 50% shares in the company. Things were moving really good year upon year.?

In the same period, Clif Bar was the top 3 energy bar in the country. The first 2 energy bar companies were being acquired by larger corporations. It was no news in the ecosystem that they were next in line for a sale. And not too long after the sale of the first 2 energy bar companies, they were approached by a Quaker Oats. In addition to the news or conversations in the ecosystem, Gary’s partner was quite fearful of the future of Clif Bar and was really hitting on the fact that selling to a larger corporation won’t be a bad idea. So once they got approached by Quaker Oats, it was like a no brainer decision for her. So they called up an investment banker to manage the deal and conversation.

Quaker Oats approached them offering a deal of $120 million dollars for Clif Bar. For a company generating $40 million dollars in revenue, it sounded like a good deal. This meant that both partners will be walking away with 60 million dollars.

All the preparations and planning were all done, put together ready to be signed. Gary had made a whole speech to the employees telling them that this sale will be the best thing for the company.

The deal signing was dated April 17, 2000.

3 months before that day, Gary felt so unsettled about the deal. His mind wasn’t at peace. All through, it felt like he was living in the dark, he was overwhelmed with thoughts, gloomy, it really hit in hard when he fully comprehended what was going to happen to him on the 17 of April, 2021.

They got into the office, his partner was on the phone with the lawyers, making sure all the paperwork was ready. At that moment, he told his partner, give me a minute, I need to take a walk around the block.

He left the office, not too long into the short walk by himself, he started weeping and wailing, he literally broke down in tears. He remembered every sacrifice, every hard work, and pain. He remembered his father's name (the name of the company). It was then it dawned on him that he really didn’t want to sell the company.?

Immediately he made that decision, he felt free. 3 months of gloominess disappeared, literally was lifted off him.

He walked back briskly into the office and told her that he didn’t want to sell the company. The partner seeing the expression on his face knew that Gary was being serious. She had to call every single person from investment banker to lawyer to Quaker Oats representative to call off the deal. That was it.?

Seeing all that happened coupled with her scepticism towards the future of the company, she decided to opt out. This meant that since the new value of the company as declared by Quaker Oats valuation was 120 million dollars, that meant that Gary would have to pay her 60 million dollars as the value of her 50% stake in the business.?

This was a huge decision for Gary. Not only because he now owes his partner 60 million dollars. But he had to work out a way to convince his employees that not selling the company is a good decision for the company. He got a lot of naysayers who thought he was very crazy, and it was indeed a very crazy decision. They told him, he made a very bad decision, he should have sold the company etc. It took him 9 years to completely pay off the 60 million dollar debt.?

When he was asked ‘why did you do that?’ ''Why did you make such a “crazy” decision to walk away from 60 million dollars??

What motivated him to do something like that?

He would have been very comfortable with 60 million dollars, he could be chilling somewhere but then he chose to walk away from them.

He replied with this quote:

“The power of a lot of money can be good, it can be used to do a lot of philanthropy but the power of having a good business is more than being rich”

This statement is powerful. When you really think about the impact of one business on a community, on a people, on a nation’s economy, on a family. It is much more powerful than just having lots of money in the bank. Frontier markets (as described by Efosa Ojomo and Cleyton Christensen) can become developed countries through impact-focused entrepreneurship.?

This is the key to the change that most underdeveloped countries are searching for. If you encourage impact-focused entrepreneurship, you are paving the way for a prosperous nation.

Your company exists to build people, systems and ideologies. It is like shade to millions of people (customers, employees, partners etc)

If I could convert 50 million dollars into a business, it is way more valuable than having 50 million dollars in cash, not really because of the value of the currency, but because of the value of the people, the business gets to impact over a period of time, you can do more good as a company than as an individual.

This was his thought process behind not selling the business. Apart from the fact that his father's name is connected to the business. This was the primary reason.

This 29-year-old, family-owned and staff-owned company is currently generating just over 500 million dollars in revenue with over 1000 staff.

So there you have it, the story of Gary Erickson of Clif bar.

Look out for the next episode, dropping in a few days.?