Wondering how to start a nutritional supplement company? After all, energy bars and healthy snack foods are seemingly exploding, right? Here’s how the business really works, as told by someone who’s been doing it for almost eight years, gained distribution in REI and Whole Foods, and built their own production kitchen.
Seeking healthier real food options to fuel their adventures, co-founders Caleb Simpson and Chris Herbert launched Bearded Brothers to offer energy bars made with real, whole foods and organic ingredients. In this interview, Caleb shares how they started, the challenges and opportunities of gaining national retail distribution, and their marketing tactics. Plus, why they’re betting heavily on direct to consumer sales as a channel for growth. Which means there’s a lot to learn, whether you’re in the food or supplement industry or not.
- 01:45 – Why they started making energy bars.
- 03:10 – Developing the flavors and formulas…and the name.
- 10:05 – Scaling production, ingredient selection & setting expiration dates.
- 18:50 – Seasonal flavors, outside investments & ongoing promotions.
- 25:45 – Who were their first retail accounts?
- 29:30 – Pricing and product sizing.
- 34:20 – The dreaded slotting fees.
- 38:55 – Marketing and online sales.
- 44:15 – How do you stand out on the shelf?
- 49:45 – Ownership structure and operations.
- 57:10 – How much margin do grocery and retail stores want?
- 1:01:30 – Operational challenges & the tools they use.
POST GAME ANALYSIS
The food and beverage industry can be tough. Really tough. You’re dealing with small ticket items, so you’ve got to sell a lot of them. And as you’ll find, retail can play a very important role in your growth, but it can also be very expensive to get and maintain.
I like that they realized the “Adventure Naturals” name wasn’t right before they got too deep into that. Picking the right brand name and imagery can really set your product apart, which is the low hanging fruit for early success and getting people to notice your product.
Another factor that can affect your costs is the quality of the product. The more particular you are, the more expensive it’s going to be. That’s why crappy junk food is so cheap, because they can use the least expensive ingredients. If you want the best, you’ve got to pay for it. The trick for the brand is getting the end retail price to a palatable level without lowering your standards. One of the ways they control this is to manufacture themselves, on their own equipment, which is a bigger up front cost, but can give them economies of scale later. And it keeps them nimble, letting them ramp up or product small batch sizes based on demand.
One particularly important note is their date of entry into the market. Caleb mentions how Clif Bar has market saturation and massive economies of scale, all benefits of being one of the first energy bar products on the market. For Bearded Bros., and their competitors like Picky Bar, Thunderbird Energetica, and other small brands, the challenge now is that there’s a very crowded market. It’s harder to create a name for yourself, harder to stand out on a crowded shelf, and harder to get on that shelf to begin with. That’s something to think about before you enter a crowded market with entrenched leaders.
Once you’re on the shelf, it takes ongoing promotions and sampling to keep interest high and drive sales. Caleb says those to things are the main drivers for sales volume inside stores – sampling and price promotions, both of which encourage people to give it a try.
The other really, really important part of the process? Making those sales calls. Putting in the time is what makes a difference. So does using that time the right way. Caleb calls on the bigger chains first, because that one buyer can fill tens, hundreds or thousands of stores. Compare that to the buyer for a mom-and-pop shop and you spend about the same amount of time on each, but one yields much larger returns. That said, you have to start somewhere, and small, local independent shops are a great way to prove the concept and get early sales revenue.
Another note on sales and promotions, Caleb notes that there are a lot of his customers who wait for an email offering a discount or deal, and that every time they email one out, they get a big batch of orders. Offering a subscription program that provides customers with an ongoing discount makes the sales more consistent and raises overall volume because people don’t forget to order or miss an email.
Having a call to action on your site to drive them through a purchase process is also key. A good landing page or exit offer drives sales. He reinforces this point at the end of the episode with the additional insight that the costs of running and promoting direct online sales typically yields far higher returns than real-world promotions, which is why they’re putting a renewed focus on DTC sales.
If you notice that my hunch on product sizing was wrong. It was the same hunch they had with the original 2.5oz bar. What most consumers were looking at was price, not size, and educating them on the price-per-calorie benefit was simply too much to do. It’s that kind of market research that can be tough to get without actually launching, so my recommendation is to get things to a point where you can launch, then pay close attention to customer feedback to fine tune as you go.