When Daniel Lubetzky started his company PeaceWorks, he aimed to unite groups in conflict in business ventures, such as a sun-dried tomato spread made in an Israeli factory that employed many Palestinian workers.
His breakaway product, though, proved to be one now made in the United States — KIND Bars, the healthy fruit and nut bars seen on the shelves of stores from grocers to gas station mini-marts — and he eventually split KIND Bars into a separate company in 2004.
Beyond its bars, the company now sells products such as "Healthy Grains clusters" and "Popped Snack Bites." In 2014, 500-employee, New York City-based KIND sold more than 450 million items, according to Lubetzky's recent book, "Do the KIND Thing." KIND Bars often retail in the $1 to $2 range.
The company has sold more than $1 billion worth of its products since its inception, according to a spokesperson. It hasn't hurt that KIND is in a steadily growing category. Sales of snack, nutrition and performance bars grew 26 percent from 2010 to 2015, revealed market research firm Mintel.
Yet the company has hit some bumps. In 2015 the FDA issued a warning to KIND asking that it stop using the word "healthy" on the labels for some of its bars, arguing that the nuts in the products caused them to contain more fat than meets the agency's definition for a healthy product. The FDA reversed the decision earlier this year and, following a petition by KIND, has begun reevaluating its regulations for nutrient-content claims.
But that did not slow down KIND's growth. Euromonitor International estimates that the company's sales will reach about $670 million in 2016. Recently, Lubetzky spoke with CNBC about the strategies that helped the company grow to its current size.
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1. Tap your personal pain for a great idea. In launching PeaceWorks, Daniel Lubetzky often traveled around the world, going store to store to persuade merchants to sell his products. Sometimes he craved a healthy snack, but it wasn't always easy to find something natural, like an apple.
"I needed a snack I felt would be wholesome and real but would travel well with me," recalled Lubetzky. "The stuff out there was too indulgent, tasted like cardboard, didn't feel like real food. I was on the lookout for products that would be healthy, tasty, wholesome and also convenient."
At a trade show in the late '90s, the young entrepreneur came across a fruit, nut and yogurt bar made in Australia that he thought could fill the gap in the marketplace. He began importing it and within a year generated $1 million in sales from it. Once the Australian bar-maker was acquired by a big conglomerate, however, the ingredient list changed to include sulfate preservatives and artificial sweetener. Unwilling to sell a product with these ingredients, Lubetzky decided to make his own bars, and KIND Healthy Snacks got its start.
2. Time your product right. At the time Lubetzky entered the market with KIND bars, the U.S. market was saturated with energy bars filled with unpronounceable ingredients, though there was a bar in Australia made with fruits and nuts. Lubetzky had to invest a lot of time in learning how to create a natural bar with a decent shelf life and confront constant skepticism about his idea from retailers, who thought his products looked too healthy and weren't sure how to market it within their stores.
Nonetheless, he persisted, convinced the market was ready for it. Once Lubetzky introduced the bars, he found consumers responded quickly. "A lot of life is timing," he said. "We came up with a solution that spoke to people. They could really connect."
3. Be disciplined. In the early days of PeaceWorks, Lubetzky rushed into developing multiple brands. "I was a little bit overeager and developed too many products too quickly," he recalled. Though his experimenting paid off with the sudden popularity of his KIND Bars, he realized that creating a separate company for this product would see more growth by developing a single, powerful brand. "I learned how to be disciplined and to focus," he said.
4. Don't try to conquer the world all at once. When seeking distribution for his products in the early days of PeaceWorks, Lubetzky took a shotgun approach to finding stores to carry his products, which include satay sauce and pesto. "We were so hungry, excited and naïve that I would just knock on any door," he said. By the time he started KIND, he realized it was better to take his time and grow strategically rather than to force things.
"We knew our core consumer was in the natural stores," he said. "Once we saturated the natural stores, we expanded into specialty stores. Then, when we were really strong, we went into the grocery aisles and national supermarkets. Only then did we start going into alternative channels, like coffee shops and mass retailers."
This took discipline, notes Lubetzky. Fortunately, the company's president, John Leahy, a consumer products industry veteran, had a good sense of when to expand to new channels, he said.
"A lot of companies buy distribution and get everywhere overnight," he said. "Then the product doesn't pull and they get discontinued. You have to be very careful that wherever your product goes, it has the same power. Reorders are much more important than the initial orders. You can only bring the product for the first time once by definition. The reorders can be a revenue stream for many years to come if you get them right. You will only get reorders if the product sells. They will only give you the real estate if you deserve it."
Of course, that depends on something more than distribution, said Lubetzky. "It's having a product that is so high quality, people come back for it."
— By Elaine Pofeldt, special to CNBC.com
