This year’s crop of growth award winners are all standouts in their respective markets, outperforming their own low-growth categories by a significant margin. A tip of the hat to the innovators listed here as they redefine existing markets.
Justin's Nut Butter, Small Company Winner
Justin Gold is the first to admit it: It takes no great trade secret to make nut butter. “You take nuts, put them in a food processor, and turn it on. Anyone can do it.”
So how has the 34-year-old turned a home kitchen experiment into a company approaching $15 million in annual sales? “I have surrounded myself with really smart people who have more experience than me, and as much passion as I do,” says Gold, one of five finalists for Entrepreneur Magazine’s Entrepreneur of the Year Award for 2011.
Gold’s operation grew out of experimenting with nut butter flavors in his kitchen. He’d add cinnamon, chocolate chips, or agave to homemade almond or peanut butter and put it in 16-oz jars labeled “Justin’s—Do Not Touch” to keep his roommates from dipping in. Soon, he found himself at the University of Colorado business school library, reading up on how to write a business plan. In 2002, Justin’s Nut Butter was born.
In the early days, Gold would work a full day in retail, head to a rented commercial kitchen to make his gourmet nut butter, and then spend his mornings delivering to local co-ops and small natural products stores. “I don’t think I slept,” he recalls. His total revenue that first year? Around $27,000. “I was coming up against some walls,” he says. Even if it is gourmet and organic, it still takes a family of four about a month to eat a jar of nut butter. That means slow turns, low margins and limited growth potential. So, in 2006—while on a mountain bike ride, choking down a super-sweet energy gel—Gold came up with an idea: nut butter in a squeeze pack. After struggling to find a manufacturer (most were concerned about contaminating their line with an allergen), he purchased his own machine once used to make hair conditioner samples. His initial launch in the crowded energy snack aisle was a failure. But when he opted to sell the squeeze packs in the peanut butter aisle for 69 cents, things turned a corner.
“Consumers saw it and figured it was a trial size,” he says. “Someone who had never heard of almond butter and didn’t buy it because it was 10 bucks could buy this for under a dollar. It was really just an accident, but it ended up converting customers to almond butter.” The squeeze packs also ended up being a mainstay for backpackers or travelers who don’t want to lug along a jar of peanut butter, or dieters practicing strict portion control. Starbucks started putting them in boxed lunches, and business took off.
In 2008 with revenue at $1 million, Gold began to surround himself with a dream team of natural products innovators, including Hass Hassan, managing director of Greenmont Capital, John Maggio of Boulder Chips, and Jane Miller of Rudi’s Organic Bread. He also reached out to dozens of angel investors and brought on Lance Gentry, formerly of IZZE, who initiated an image overhaul, rebranding the company as the first culinary nut butter.
“People have to be attracted to the brand, to the look of the product. That’s something that Justin didn’t have when I came on,” Gentry says.
The company has posted triple-digit sales increases every year since, and has begun to expand beyond the PB&J aisle, launching a new organic fair-trade peanut butter cup in 2010—which now makes up 20% of the company’s revenue. Up next? A new “Snickers-type” candy bar, due to hit the shelves at Whole Foods in March 2012, and a new environmentally sustainable squeeze pack due out later this year.
The obvious question: When will he take the money and run? “It’s all about having fun,” he says. “If I’m having fun and I’m challenged, I’ll never sell it. But if it gets to the point where all I want to do is something different, I will do what my heart tells me to do.”
VMI Nutrition, Mid-Size Company Winner
In the crowded and cutthroat world of contract manufacturing, the transaction often looks like this: Marketer A asks manufacturer B to produce a product. After haggling over price, manufacturer B does it, leaving the R&D, product formulation and testing to someone else. Not at VMI Nutrition.
Since acquiring the Salt Lake City-based powder manufacturer Vance’s Manufacturing Inc. in 2006, VMI has grown sales from $10 million to $80 million and grown the staff from 50 to 250. They’ve also broadened the company focus from manufacturing powders-to-order for Utah-based direct-selling companies to developing, producing and testing powders for sports nutrition and weight-loss companies in an array of sales channels.
“It’s really quite unusual to have a true one-stop shop,” says United Natural Products Alliance Executive Director Loren Israelsen, who nominated VMI for this year’s growth award. “Some companies will tell you that they do it all, but they farm out some of the work and you don’t know it. These guys really do it all.”
VMI was founded in the 1990s by Vance Abersold as a brand company making fat-free, gluten-free, non dairy beverages. Over the years, it expanded to manufacture other powders for other marketers. Jeremy Reynolds (formerly of Weider Nutrition) bought half the company in the early 2000s and grew it significantly. After Abersold died in 2005 and Jeremy Reynolds found a different business opportunity he couldn’t pass up, Jeremy’s brother Jeff Reynolds (who has a banking background) and Bruce Remund (formerly a VP at Nutraceutical Corp.) bought the company.
In 2008, they founded Genysis Nutritional Labs, a sister company which employs top notch chemists and microbiologists to conduct full analytical testing on not only VMI’s products, but also those manufactured elsewhere. “When we quote a product, the testing is built into the development process,” says Reynolds.
In its effort to become “the best in class for powders,” VMI has also created its own large formulation lab, which does nothing but formulate bases and develop new flavors—a critical feature to earn the loyalty of fickle powdered-beverage consumers. And through a relationship with the University of Utah sports nutrition researchers, VMI has also set out to develop a new line of “value-based” patent-protected ingredients and blended products.
“Right now, you have commodity products, like base proteins and simple carbohydrates, and you have really expensive intellectual-property-based ingredients that add 10 cents a serving to a bottle,” says Reynolds. “There is nothing in the middle. Our goal is to develop IP that is value-based.” Its first product, a circulation-boosting ingredient called Tri-flo, has already been licensed to Bodybuilding.com and Scivation and VMI has several more in development.
Meanwhile, VMI has already become active in supporting its trade, earning a membership to the highly discriminating group UNPA (which has only 41 members), and working to understand new state and federal manufacturing guidelines so it can help its customers meet them.
“A lot of the contract business is passive, in the sense of ‘you ask for it, we’ll make it.’ VMI is taking more interest in what consumer trends and interests are,” says Israelsen. “They wanted to be involved in broader industry issues from the start. The team at VMI represents a new generation of dietary supplement company executives that I feel really good about.”
Herbalife, Large Company Winner
Herbalife founder Mark Hughes had two goals in mind when he started the company in 1980. “He wanted to change the nutritional habits of the world,” says company president Des Walsh, “and he wanted to give regular people an income opportunity where their success was only limited by their own willingness to work hard.”
Sadly, Hughes died in 2000 at the age of 44, but his mission has undoubtedly been accomplished. In 2011, the company announced its entry into its 79th country, Ghana. Herbalife now boasts approximately 2.3 million independent distributors. And in its third quarter of 2011, it boasted a net sales increase of a record 30% to $895 million (on volume growth of 23.4%) over the previous year. That’s the highest volume point growth rate in the past five years. All of this at a time when the direct-selling industry as a whole has seen better days. “Herbalife has bucked the trend and put up phenomenal growth in every geographical region,” says analyst Scott Van Winkle of Canaccord Genuity.
Key to Herbalife’s recent success have been its “Nutrition Clubs,” informal gatherings at distributor homes or public spaces, where people can stop in and have one shake while learning about nutrition and visiting with friends. The idea was launched a decade ago by a distributor couple in Zacatecas, Mexico. They found that many of the people who needed Herbalife nutrients the most couldn’t afford to buy a monthly supply, says Walsh. But they could afford a few dollars to pop into a nutrition club. Soon, they were coming several times a week, and they often walked away with more product for their families. Today, Herbalife has Nutrition Clubs in nearly every country in which it operates, including thousands in the United States. “There is a value proposition here,” says Van Winkle. “They aren’t selling hundred- dollar vitamins, they are selling $3 or $4 meals.”
In 2011, the company waded into the new territory of sports nutrition for elite athletes, rolling out a new seven-product line called Herbalife 24. Meanwhile, it is working hard to pump up its visibility among the younger, leaner set by sponsoring hundreds of sports teams, individual athletes, and events like the Herbalife World Football Challenge, dragon boat races in Hong Kong, and badminton tournaments in the Philippines.
Going forward, Herbalife’s biggest obstacle may be its own success. “Keeping up that pace of growth is always a challenge,” says Van Winkle. “They just have to keep everything new and fresh and keep the story going.”