It all started with a little red wagon and a family recipe.
When Joel Clark was a kid, his mother, Penny, was a bit of a natural foods pioneer. It was the '80s — Jane Fonda was making workout videos and most people had no idea what kale was. But Penny would make homemade green smoothies and grind her own wheat. She had a recipe from her dad for healthy, whole wheat pancakes, which the family loved.
Then when Joel was 8, his mother helped him package the pancake mix into brown lunch bags with the recipe written on the outside. Joel piled his inventory into his little red wagon and off he went, selling the mix to his neighbors in Salt Lake City.
Back then, it was simply a fun summer activity. Now, decades later, Joel, 43, has built a booming brand around the pancake mix and is expecting to hit well over $100 million in revenue for 2018. His Kodiak Cakes is even the top-selling brand in the pancake mix category at Target, beating out big brands like Aunt Jemima and Bisquick, according Target data provided by Kodiak. Target declined to comment to CNBC.
But it took decades of hard work — and a failed pitch to investors on ABC's “Shark Tank” — to build the business.
In the mid-'90s, Joel's older brother Jon, now 48, but who was then in his late 20s, had the idea of taking the beloved family recipe and turning it into a viable product and business.
The brand, Jon decided, would be rustic, natural and wholesome — a reflection of the salt-of-the-earth life the Clarks lived in Utah. The product had to be healthy and whole grain, but also tasty. Penny encouraged Jon's entrepreneurial efforts so he set about modifying the recipe to turn it into an easy "add water only" mix. He experimented in the kitchen, asking his friends for their opinion on the pancakes.
Jon launched Kodiak Cakes in 1995, manufacturing the mix with the help of a small co-packer in Utah, storing the inventory (about 120 cases) in his basement. Jon and Joel, 21 at the time and a student at the University of Utah, set about selling the mix. Gone was the little wagon, but the brothers still sold the product door-to-door to gift shops, hitting ski towns like Park City, Utah, Jackson, Wyoming, and Sun Valley, Idaho.
“It was actually a lot of fun,” Joel tells CNBC Make It. “We would each take half the town … like you take one side of the town, I’ll take the other, and we’ll meet back here in a few hours and we’ll see if we can sell some of these pancake mixes.”
Though the mix was positively received, revenue that first year was less than $30,000, according to the company. For the next couple of years, Jon operated Kodiak as a simple side hustle, with Joel helping with selling the product.
Two years in, with the company's annual sales still at just $29,000, Jon asked Joel to take over the company; Jon had a family and wanted a steadier income. So he passed along the business and began working in health-care consulting.
At the time, Joel was still a college student, but he'd always had an entrepreneurial spirit, dating to his red wagon days. Following in his brother’s footsteps, he operated Kodiak on the side for the next seven years. At one point, Joel left to go to London for his MBA, so he enlisted a University of Utah student to keep the company afloat for the year. Joel also held down jobs in management consulting, with Kodiak continuing to chug along.
"It was so many years of bootstrapping, and just trying to hang in there and keep it alive and keep it going," says Joel. "And we didn't really have any money to put into it, so it just kind of had to grow on its own."
In the beginning, Kodiak took on hardly any outside investment. In fact, the first time Joel received a big check was in 2000, when a neighbor gave him $13,000.
"I remember I went over to his house and he gave me the check and we signed a few papers and I walked out of his house with this check for 13 grand, and I looked at it and it felt like all of the money in the world to me," says Joel, who is now married with four kids, ages 8 to 17. "I was like, 'Wow, I've got to make sure I get this guy his money back.'"
Kodiak wasn't exactly making significant strides, but it was not something Joel was willing to give up, either. So in 2004, he quit his job as an analyst at a management consulting company to work on Kodiak full time, with his retired dad, Richard, helping him out. That year, Kodiak did $150,000 in revenue.
The bootstrapping wasn't easy. Joel says his wife, Colleen, was incredibly supportive of his entrepreneurial endeavors, but with young kids, times were tough, and he says he wouldn't have blamed her if she ever told him to quit chasing his pancake dream. But she never did.
"Beyond being really tight financially, I was working super long days with Kodiak Cakes, fixing up homes, buying and selling cars, and even opened up two cookie shops that died and caused us to lose a lot of money," Joel says." For my kids, they were young enough at the time to not understand the implications of the uncertainty, so to them, we had this cool pancake brand that they loved."
When it was time for Kodiak Cakes to hire a chief operating officer in 2009, the same year Richard took a step back from the day-to-day of the company, Joel brought on Cameron Smith, who was fresh out of college.
"I didn't have the money for someone with lots of experience," Joel says. "He seemed like he had a lot of drive and problem-solving skills beyond his years, though, so I hired him, and he grew into that co-founder/partner role quickly."
Joel repaid his generous neighbor in 2010; he didn't want anything but his money back, so Joel gave him the same $13,000 plus a $500 gift card as a thank you. By then it had been a decade of hustle, and the company had still only done $1.4 million in revenue that year.
And there were two occasions when Joel had to borrow money from his father (which came from a home equity line), he says. The first time, in 2009, Kodiak had inadvertently oversold a promotion at Safeway, which cost the business $50,000. Joel's dad lent him the funds, which Joel paid back within a year.
The second time came in 2012 for a much more exciting reason: Kodiak scored its first Target order for nationwide distribution. Joel needed $200,000 he didn't have to make it happen.
"I was hesitant to ask my dad, knowing he was in his 70s and couldn't afford to lose that money," Joel says. "But he believed in Kodiak Cakes and was happy to lend the money."
Finally, things were slowly starting to happen for Kodiak. Target was for sure a milestone if not exactly a watershed moment. Kodiak did $3.5 million in sales in 2013, says Joel, and there seemed to be a steady drip of success. Joel paid back his dad, who had also earned equity for working with Kodiak from 2004-2009 "and really became a co-founder," Joel says.
Then came 2014.
“In 2014, it was kind of a perfect storm,” Joel says.
As the company was racking up sales and trying to innovate new products, COO Smith presented Joel with an idea: Why not try to score a spot on ABC reality show “Shark Tank?” It could be good for exposure, he suggested. Joel, who had never seen the show, had no qualms. Smith penned an email to the "Shark Tank" casting website, and two months later, Kodiak Cakes was recruited to appear on season five.
Joel and Smith prepared. Prior to showing up, they enlisted a friend in public relations to create a mock panel. Joel and Smith delivered their pitch and the panel grilled them with questions. The pair also binged hours upon hours of “Shark Tank.”
“Cameron and I watched a ton of episodes and would write down all the questions we ever heard, so we would role-play each other for hours and go over and over different questions and how we would answer them,” Joel says. “And I think that was one of the best things we did, because we walked out onto the show feeling prepared.”
But during their pitch, the sharks weren’t exactly biting. Joel walked into the tank asking for $500,000 in exchange for a 10 percent interest in the company, arguing that over the next four years, with the sharks' investment, Kodiak would make over $20 million. During the segment, sharks Kevin O'Leary and Barbara Corcoran offered a joint counter, 50 percent ownership for $500,000, while Robert Herjavec offered $500,000 for a 35 percent stake in the company.
Believing they were undervalued, Joel and Smith left without striking a deal.
Joel remembers the experience feeling like an uphill battle, especially with O’Leary, who he says proclaimed Kodiak Cakes as simply a commodity.
“That’s what it kind of felt like this whole time, this battle trying to get them to align with us. When they low-balled us, and we walked away, I actually felt sort of relief, which is kind of funny,” Joel remembers. “Because I think I felt like, well, they aren’t on-board, they didn’t see the value even close to where we saw.”
While Kodiak might not have won over the sharks, it certainly won over viewers. After the episode aired in April 2014, the company saw an immediate spike in sales; Joel estimates that in the six weeks after their episode aired, the company did about $1 million in incremental revenue. Since Kodiak was already in Target and Safeway stores, fans could easily pluck some pancake mix off the shelf during a routine grocery run.
It was in June 2014, though, that really blasted them to success. That's when Kodiak Cakes launched a new product, Protein Power Cakes, made with 100 percent whole grains, non-GMO ingredients and packed with 14 grams of protein per serving (its whole wheat pancake mix has about half that). It turned out to be the secret ingredient needed to capture the attention — and taste — of millennials, a consumer group businesses covet.
At the time, the trend of protein was just starting reignite, and Joel had been adding protein to his own Kodiak Cakes.
"We were watching those trends, looking at Google search words and how often those [words like 'protein'] were being searched," Joel says. "And in fact, we trademarked Power Cakes in 2012 but we didn’t launch it for a couple of years because we weren’t sure how mainstream it could be. But once we decided to launch, and we really started to believe in it, we just lucked out.
Before the launch of Power Cakes, Kodiak offered two pancake mixes (a whole wheat, oat and honey flapjack mix and a buttermilk and honey mix), one brownie mix, one cookie mix and four muffin cups (instant, microwavable muffin mixes in a cup). Power Cakes, though, were a game-changer.
“That just shot to the top,” Joel recalls. “That immediately became the No. 1 selling pancake mix at Target by about 20 percent. ... It just immediately became No. 1 and resonated with millennials like crazy.”
Protein Power Cakes, it seemed, were the holy grail of pancakes. A quick search for #KodiakProteinPancakes on Instagram yields scores of foodies and health nuts (nearly 300 handles) showcasing their stacks of Kodiak flapjacks.
“I think millennials were looking for more protein, and the fitness crowd also really contributed,” Joel says. “They started to discover it on social media and Instagram, and they were very vocal, like super vocal, about it. They’re very community-orientated, they talk about what they eat, and so it started to really spread on social media like crazy.
“So that’s what helped us get the word out to millennials, and then they started to buy it,” he adds. "And then we started hearing things like, ‘Hey, college kids are making Kodiak Cakes in their dorms.’"
In 2016, Kodiak finally took on outside money when Sunrise Strategic Partners made a minority investment in the business. Now, Joel estimates Kodiak will blow past $100 million revenue in 2018. The brand has nearly 45 products, including everything from $5.50 cornbread mix to $5.50 cinnamon power waffles. Other items offered include cornbread mix, all-purpose baking mix, toaster waffles, and "Kodiak Cups," which are instant, microwaveable mixes ranging from Apple Cinnamon Oat Muffin Cups to Buttermilk and Maple Flapjack Cups (it tastes like pancakes and muffins in a cup).
At Target, Joel says Kodiak Cakes is now the no. 1 best-selling pancake mix brand with a 54 percent category share, beating out big names like Aunt Jemima, and Bisquick. (When reached for comment by CNBC Make It, Target declined to confirm any ranking or sales numbers, saying it does not "share sales data or provide information pertaining to our vendors and the success of their products at Target.")
On Amazon, the product boasts a no. 2 ranking in the fresh bakery breads category, and a no. 8 ranking in the pancakes and waffles mixes category. Also on Amazon, the product has more than 650 positive reviews, though there are nearly 50 critical ones, complaining of things like the pancakes sticking to the pan when cooked and the finished product being bland or spongy. Some critics on Reddit have also complained about not being able to cook the pancake batter all the way through.
And of course, there have been missteps. In January, Joel told a food industry website the company's granola and oatmeal products didn't sell the way he'd hoped and the same happened with an organic pancake mix. In March, Kodiak voluntarily recalled its Blueberry Chia Energy Waffles due to undeclared milk in the product, according to the Food and Drug Administration's website. Kodiak no longer manufactures that product (it's now just blueberry) and the company says it worked quickly to get the product back onto shelves with the correct labels. ( "Safety for our customers is always a top priority and we wanted to ensure our labels were not misleading anyone.")
But all in all, business is booming, even more than Joel had originally imagined it could. "This year we will do over $100 million in revenue but we often see growing consumer food brands with a lot of potential valued at between two and four times revenue," he says.
With those numbers, "Good for them proving us wrong!" "Shark Tank" investor's Corcoran tells CNBC Make It.
“Joel and Cameron deserve a lot of credit, " Corcoran says. "They have a great brand and they were unwilling to budge on their company’s value. They bet on themselves when they walked away and have tripled their projections since! That’s what makes entrepreneurs like them great. We told them they weren’t worth the asking price and they’re proved us wrong.”
After decades of struggling to stay afloat, it seems that Kodiak Cakes has finally found sweet (and syrupy) success.
“When you’re an entrepreneur, you need to be rational, you need to put together a plan,” Joel says. "But sometimes you have to be completely irrational, you have to act irrational, you have to put blinders on and go against the odds and go against logic. And the only way you’re going to do that is if you’re super passionate about something to the point where you don’t care about the downside, or you don’t care about the obstacles in your way.
“Sometimes the obstacles are great and logic would say, you should quit,” he adds, referring to the decades it took to build the business and how strapped for cash the company was. “But passion can overcome that. It has to.”
Disclosure: CNBC owns the exclusive off-network cable rights to "Shark Tank."
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