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The next Burt's Bees? Small firm gives it a shot

Source: Zarbees

By day, Dr. Zak Zarbock is a full-time pediatrician in South Jordan, Utah. By night (and also by day, and weekends) he is building an empire of natural remedies for coughs, colds and allergies.

"I was tired of interacting with frustrated parents," Zarbock said. Repeatedly, he was told of sick children up all night coughing, and "nothing was working." He decided to find a solution. "I'd always kind of had an interest in business."

At the time Zarbock began researching his second career, the FDA was recommending that young children shouldn't take cough medicine. Then he found a 2007 Penn State study suggesting buckwheat honey was better at stopping coughs in children than over-the-counter drugs (OTCs).

That same year, Zarbock—the father of four boys—took $10,000 of his own money, combined it with $10,000 each from a family member and a friend, and formed Zarbee's, with the aim of making safe, effective and natural cough medicine.

Zarbock is not a chemist, and had no manufacturing experience, but Utah is home to several nutritional supplement companies like Usana and MonaVie. There is a large base of contract manufacturers with experienced formulators, and Zarbee's hired one to create its first product: a cough suppressant made of buckwheat honey,vitamin C, zinc and natural flavors, "because buckwheat honey doesn't taste very good on its own," said Zarbee's CEO Bryce Johnson.

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Product in hand, Zarbock started giving away samples to local pediatricians. Finally, he went to a local grocery chain and asked, "Who makes your decisions on what you put on your shelves?" Eventually, the doctor said, he worked his way up to the buyer for the store and struck a deal. Soon, "We were outselling the competition six to one," said Johnson. "We were killing it."

Next, Zarbock raised $150,000 to increase production. Then he began a long and rocky road to get into Walgreen. "It took a lot of convincing, a lot of trips to Chicago," he said, but eventually Zarbee's succeeded. In fact, the young company almost couldn't handle the success. Johnson said that early on, Walgreens suddenly called wanting an 80,000-bottle order in 10 days. "We had no bottles. We had nothing. ... It was all hands on deck."

That was 2 1/2 years ago. Six months later, Zarbee's got shelf space in Walmart. Then came Target, Rite Aid and Amazon. Products are now sold in 50,000 stores across the country. One seemingly obvious omission for this drug-free natural solution is that Zarbee's is not sold at Whole Foods. "Not yet," said Johnson. "Zak's approach was, 'If I have a coughing child, I'm going to go to Walgreens or Walmart, not Whole Foods'."

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This year, the company plans to grow from two products to seven. One new launch is an allergy-relief aid based on the Butterbur plant. However, Zarbee's cannot label any of its products as treatments for cold, flu, or allergies, because of FDA rules.

While Zarbock says all of the products have gone through clinical testing, the entire FDA approval process "would cost millions and millions of dollars." So for now, "We can't say 'allergy relief' or 'decongestant.' We have to say 'seasonal relief.'"

Sales this year will top $10 million, according to the company, and management expects Zarbee's to be profitable starting next year. The former CEO of Burt's Bees is on the board, and that's no coincidence.

"Burt's Bees started as a lip balm, and then grew into so much more. That's what we're trying to do, but for OTCs,"said Johnson. "We're trying to build things that are safe, effective and natural."

—By CNBC's Jane Wells.

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