Natural Foods Merchandiser

Entrepreneurs learn from their mistakes

Let?s say you start a company. You work ridiculously hard, grow your business and sell out big. Then, you go sail around the world. Right?

It might seem like the perfect scenario, but the early retirement part isn?t what seems to happen for a good chunk of entrepreneurs in the natural foods world. Of course, some have mortgages to pay and kids to put through college. But for many entrepreneurs, the rush of building a business from scratch drives them to jump back in for a second and third round.

?I like the creative process of having an idea and making it happen,? says Hass Hassan, who co-founded the Boulder, Colo.-based Alfalfa?s retail chain in 1979, which was sold in 1996 to Wild Oats. By the time he sold out, much of Hassan?s ownership had been diluted by outside investors. To support four kids, he needed to continue working.

It wasn?t long before he saw a fresh opportunity overseas and started building a new retail chain in the United Kingdom, where he grew up. By 1998, he opened his first Fresh & Wild store and just last year sold the seven-store chain to Whole Foods for $38 million.

Now, Hassan sits on the board of directors for a number of companies, including Whole Foods, and is a partner in a Denver venture capital firm called Greenmont Capital Partners, which offers not just money to startups but expertise from people who have been around the block in the naturals business.

Hassan says starting a business the second time was much easier. He had the track record. He had the connections. And the market was ripe for his second venture, unlike when he started Alfalfa?s, which was a pioneer in the natural foods industry.

Hassan also learned from his mistakes. When he raised venture capital to expand Alfalfa?s, Hassan says he felt incredibly grateful to investors. ?I felt lucky. They had all the power,? he says. He had a different view when he dealt with investors to grow Fresh & Wild. ?I realized the money is one piece of the equation. A $5 million investment is not more valuable than the team, the idea and the drive to make the idea a reality.?

Mike Gilliland learned his own lessons after starting the Wild Oats retail chain 25 years ago. He left Wild Oats in 2001, and then two years ago, he went on to start Sunflower Market, a Longmont, Colo.-based chain of smaller, low-cost natural foods stores.

While chief executive officer at the publicly held Wild Oats, Gilliland missed the energy of a startup, he says. He wanted to focus on selling groceries rather than dealing with Wall Street investors. Today when he goes to work, Gilliland wears a green smock with a nametag that says ?Mike,? making his role as CEO virtually indistinguishable to customers.

For Gilliland, the easiest part of being a repeat entrepreneur was money. When he started Wild Oats in 1984, he relied on debt from 37 credit cards. And for the first nine years, the business operated on a cash-strapped budget.

With Sunflower, Gilliland and his wife invested $30 million of their own money to start. Now just two years old, Sunflower has 10 stores and $120 million in sales. It took 10 years for Wild Oats to get to that size, he says.

But while the ride has been faster and smoother with Sunflower, Gilliland realized that there?s still plenty he forgot about running a startup. ?It?s a lot more work than I remembered,? he says.

He still made mistakes. For instance, Gilliland says he wishes he had installed more information technology systems to get better information about what customers were buying. He had done the same thing at Wild Oats and regretted it.

?We thought we knew exactly what the customer wanted,? he says. ?It ended up costing us a lot more money in the long run.?

Yet there?s something to be said for the reputation, credibility and connections developed by a successful entrepreneur. Thirty-two years of starting businesses helped Marc Peperzak fuel fast-paced growth at his latest venture, Aurora Organic Dairy, based in Boulder, Colo.

Peperzak has started 31 companies during his career, including a bank and an insurance business, allowing him to develop a long list of contacts from vendors to financiers. Along with Mark Retzloff, he was one of the original architects and investors of Horizon Organic Dairy. Aurora Organic Dairy, one of his ventures, operated dairy farms that provided milk to Horizon.

Peperzak served as chairman of Horizon until 2000, when he decided to concentrate his time and money on Aurora Organic. He relaunched the business two years ago, producing private label organic dairy products for both supermarkets and naturals stores. The company hit $55 million after two years and is growing at a 100 percent annual clip, Peperzak says.

Alex Dzieduszycki witnessed a similar trajectory with his latest company, Alexia Foods Inc., thanks in part to the success of his first business, Terra Chips. He sold the natural potato snack business to The Hain Celestial Group in 1998. Terra Chips had reached $23 million in sales within eight years.

After a three-year stint as vice president at Hain Celestial, Dzieduszycki intended to dabble in various businesses, such as importing Belgian condiments and sauces. But his idea for all-natural and organic frozen potato products took off and evolved into a new business. Because of his history with Terra Chips, he was able to get appointments with retail buyers. The frozen potato market was competitive, but buyers were looking for something different.

?When we called on Whole Foods, we knew who to talk to, and we knew how to come through with the right number of products at the right price,? he says. Within three years, Alexia Foods, based in Brooklyn, N.Y., has hit $20 million in revenue, and has 23 frozen potato and appetizer products. Unlike Gilliland, Dzieduszycki never forgot the hard work involved in a startup. In fact, he hoped to avoid it. ?The pressure of running and growing a business—I didn?t want that in my life,? he says. Nonetheless, Dzieduszycki is ?extremely happy? he decided to start Alexia.

A professionally trained chef, Dzieduszycki says he feels driven to keep inventing in the natural foods industry.

?I look at it like I?m destined to do this,? he says. ?I just enjoy it. I like expressing my ideas in this format. I?ll probably do it again.?

Jennifer Alsever is a freelance writer in Denver.

Natural Foods Merchandiser volume XXVI/number 9/p. 48, 50

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