Justin’s Nut Butter: Justin Gold. He Was Waiting Tables, Then...He Reinvented Peanut Butter.

[Music] You can imagine the confusion when you are studying to become a lawyer. And then I move to Colorado and I'm waiting tables and I'm like, "Yeah, I'm getting closer to going back to school." You know, I'm in a college town now and everyone's, "Yeah." So then I come home and I'm like, "Hey, I've got something I want to show you guys. I'm really excited about it." And they're like, "Oh, you know, is this a college application? Are you going back to school?" And I'm like, "And I take the lid off the shoebox." And I'm like, "I want to make peanut butter." [Laughs] [Music] Welcome to How I Built This. A show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Ross and on the show today, how Justin Gold used his home food processor to make a better tasting peanut butter and turned Justin's nut butter into a category defining brand. [Music] There's a strange thing that happens when you build something successful and you'll hear this from a lot of founders. The chase, it never really ends. You get your first customer and then you want a hundred. You hit a million in sales, then you go for ten million. The more you grow, the more complicated it gets, and the bar just keeps kind of moving. All of this was definitely true for Justin Gold. Justin started with a simple idea. He wanted to make a peanut butter that was better than the stuff sitting on the supermarket shelves. And at first, he just wanted to sell a few jars around Boulder, Colorado, where he lived. At the time, he was waiting tables and working at the local REI and he thought, "Hey, this could bring in a few more bucks." But every time he sold a jar of peanut butter, every time a customer reacted, he'd open the door to a bigger ambition. So eventually, he pitched his local whole foods, and then more whole foods, and then grocery chains across the country. And along the way, Justin kept experimenting. What started with a food processor in his kitchen became a business built around flavor nut butters, flavors like maple and honey and cinnamon. But there was a problem. A typical jar of peanut butter in someone's pantry lasts a long time, especially if you're not making PB&J for kids on a daily basis. So after some early success, sales of Justin's nut butters started to stagnate. And that was a problem, because, well, what do you do when you hit a wall that seems immovable? Well, in Justin's case, he climbed over that wall with an idea he got while working at REI and going for long bike rides. An innovation that would help propel Justin's nut butters into a huge, nationally known product, a brand that would come to be worth hundreds of millions of dollars. Justin Gold grew up in Western Pennsylvania. His dad was a dentist, and his mom's family owned a natural food store in the area. In college, Justin studied to become a lawyer, but instead of going to law school, he decided to go in the opposite direction. You know, I was vegetarian, I had long hair. I really felt like I was a hippie. And so the goal at that point was to move as far away as I could and I went to the Bay Area. And I lived in point rays and I lived there for about a year. And then I met like, you know, some real like living up the land hippies. And I realized I'm actually quite square. And maybe I'm not a hippie, but you know, what am I? Where are my people? Where do I belong? And so after a year of waiting tables and working in Norco, I decided that I wouldn't give the mountains a try. But I wanted to go to a university town. I wanted to find a town near the mountains at how to university. And at that time, it was like, all right, well, I had a friend who went to University of Boulder and he loved it. And so I just started there, totally on a whim and just moved out here and started to wait tables in Boulder. And that would have been in 2001. So you're all right. So you're in Boulder, you're waiting tables. But in the back of your mind, it sounds like the idea was you would maybe go back to school, there's the University of Colorado there, maybe get a degree and something. Was that kind of in the back of your head? Honestly, like for the first year that I'm here, I just want to make friends fit in and I want to learn where the good mountain biking spots, you know, the good ski areas and just get settled. And in the back of my mind is, okay, there's a university here and I would like to go back to school at some point. All right. You were waiting tables, but you were also doing the things that people do in Boulder, right? Like biking and hiking and skiing and all those things. Tell me about your diet, your vegetarian. So for protein, you were eating beans, nuts, stuff like that. Yeah, a lot of salads, beans, nuts, a lot of tofu, tempeh, you know, textured protein, chicken nuggets and things were coming out. And so, you know, bokeh burgers and veggie burgers. Yeah. And when it came to things like peanut butter or nuts, I mean, was that a big part of your diet? Yeah, I'd say growing up, you know, peanut butter and jelly was the first thing I learned to make. You know, peanut butter and banana is to this day one of my favorite sandwiches and it was cheap. I guess one of the things you notice is that the peanut, the options for peanut butter are limited, right? This is like 2002, 2001 and there are like basically two options, crunchy or smooth and that's it. And that struck you as unusual. Yeah. What's interesting is if you walk into a natural food store, you were going to a co-op or you were going to a specialty store and even like at the regular grocery food stores, it was smoother crunchy and they'd all have all the oil at the top of the jar. And then you could also just grind your own, right? They used to have these grinders in the store and you would just take an empty container and put it under it and you would wait 30 seconds and watch it grind. Some stores still have it. Oh yeah, they're great. They're great. And then what really got me curious is you'd walk the aisle and there was a small little peanut butter and nut butter section and there was a preserves, jams and jellies section that was three times the size of the nut butter section. And it was just shocking to me. There's all this variety in all of these different preserves but not with nut butter's. So then I have a sweet tooth and so I would go home and I would make a peanut butter and jellie and sometimes I'd run out of bread and I would just take the jelly and the peanut butter and mix it in a little bowl together and just eat it with a spoon, right? Yeah, sounds pretty good. So now you're eating this sweetened peanut butter with jelly, right? And you're like, wow, this is really good. And now you're using honey and you're like, this is really good with honey. Why isn't anybody just selling it? Peanut butter and honey, that seems pretty simple. And then you just start thinking, can you not make peanut butter and honey? Does it not work together? And so then that's when I started to get curious and started to kind of create formulations and recipes. In your apartment? Yeah, I was living in an apartment with three other roommates. Okay, so you're living in a apartment with three other roommates and what you start to make, just like make your own peanut butter? So at that point, you're like, okay, if you can grind it in a store, how hard can it be to make it? Right. So you're like, I bet a food processor can make peanut butter. So then I would go to the co-op and I would buy, you know, five pounds of dry roasted peanuts and five pounds of dry roasted almonds and then I'd bring them back to the apartment and I would use the food processor. And you would literally, you turn the food processor on, it grinds everything up and then you stop it, you take a spatula, you push down the sides, mix it up a little bit, turn it back on, do that three or four times and you have peanut butter and like, you know, under a minute. And so then I would take the peanut butter and I would add honey to it. Then, you know, once I add the honey and then you put it in a jar and it's warm and it's freshly made, it's perfect. It's perfect. Yeah. But then, you know, if you wait three or four hours or overnight, it gets kind of mealy and it doesn't hold up well. And after a day or two, I'd realize, oh, well, that's why they don't have all these different flavors because in a few days, the texture's off and it doesn't taste good. And then just you start thinking, okay, well, it's probably the water activity and the oil, oil and water don't mix. What if I used less honey? What if I used something that had very little water, if no water and then you start to run these experiments, you know, an example is banana, right? So that's kind of the holy grail for me. There's banana chips, there's freeze-dried banana, there's dried banana, there's banana flavor, banana syrup. So these start like experimenting with different types of banana and before you know it, like, you know, okay, so should this be 10% banana, 5% banana? 20% banana. And so all of those two ingredients peanut butter and and banana can turn into like 10 jars. And all these jars are numbered, and I would keep a journal. And the journal would have the number, and it would have the percent of peanut butter and the percent of other ingredients, including salt. 'Cause I'm like, okay, well, if I find one I really like, I wanna make sure I can replicate it. And so I'd have all these jars, they'd all be numbered. I put some in the cupboard, I put some in the fridge, I'd wanna understand how temperature impacted the product. And I try to lot of different things at that time. - Yeah, it's interesting. I mean, you are your experiment with the chemistry, right? And the interactions between ingredients, it's sort of like ice cream. Like if you put too much water in ice cream, you get crystals, right? Which is why a lot of ice creams use like liquid sugar or tapioca syrup because the water content is lower. And so it's not like now, where you can literally go on Amazon now and buy powdered anything. You know, you can get powdered spinach and whatever you want. But I'm thinking 2001, that's not so easy to get. - Yeah, I mean, I would buy freeze dried strawberries and then I would grind them in a food processor and turn it into a dust. - Yeah. - And you know, or I would buy cinnamon and I would make a cinnamon peanut butter, you know, because it was a powder. And so very quickly, I had 30 or 40 different jars. And again, like, so let's just say you wanted to make honey peanut butter. Really, it sounds simple, three ingredients. - Right. - Peanuts, honey, and salt. - Right. - All right, well, what type of peanuts do I want to use? 'Cause at the store here, there's Valencia peanuts, there's Virginia peanuts, there's Spanish peanuts, there's runner peanuts. And then do I want a light roast or a dark roast? And some peanuts have skins on them and some don't. What happens if I make peanut butter with a skin on it? Right? And so now one ingredient turns into like eight different, you know, roads, you know. So all of a sudden, three ingredients turns into a lot of trial and error. - So I'm curious. I mean, you're like 24 or 25 at the time. You're living through mates and boulders, you're waiting tables. And you're doing this, processes just by, by the way, how long roughly were you kind of doing this experiment? Like a few months? - Probably about four to six months, yeah. - Got it. But it sounds like it was a real, like you got really into it. Were you doing it in part in the back of your mind thinking, if I can crack this, I might be able to, you know, sell these. - Yeah, I was. And I was working at a restaurant. So I'd bring samples in for the chefs and for the wait staff. And I'd be like, do you like this? Do you think it tastes good? And it was so silly because I'd be like, this is 10% honey and this is 15% honey. Like, which one do you like better? And it's like, you know, who cares? Like, but I cared. Like I was really curious. - Yeah. So you did this for like six months, kind of just experimenting. And so you got to the point where you were like, okay, I think I wanna turn this into a business. What then did you do? Like did you write a business plan? Did you save your money from tips? Like what were all the steps you started to take to go to the next step, which is like, okay, this is gonna be a business. - Yeah, so the first thing that I knew I had to do was write a business plan. And I don't know why I thought that maybe it was talking to some friends and they said, you know, a business plan is probably what you need. And so where I really got lucky is being in a college town. So I went to see you's business school's library. And I wasn't intimidated to go to the library 'cause I wasn't a student there. In fact, I felt like a student 'cause I was the same age as a lot of these. Yeah, a lot of the kids there. And what was really fascinating is at the time, the library had an encyclopedia of business plans. Literally from eight to Z. And so I started to write a business plan. That took probably almost a year. But that's when, as I'm writing the business plan, that's when something unlocked that really gave me a competitive advantage. - Which was? - Boulder, Boulder, Colorado. I mean, here's what's crazy. So I'm writing the business plan, but the hardest part was, you know, what type of business entity do I want to be? I want to be an S-Corp, a C-Corp, an LLC. Where do you get a UPC? And how do you find an FDA food license kitchen facility? Like, where do you order jars from? Like, those are all things you can't just learn in a library. And so what I decided to do was, well, I'm gonna figure out if there are any companies that are from Boulder, Colorado, and just ask them. And this is where things went bonkers for me is, there are a lot of food companies 20 years ago, 30 years ago, that were national companies that were out of Boulder, Colorado. - Yeah, Celestial. - In seasonings and silk, soy milk and horizon. I mean, there's a lot of-- - Yeah. - Is he soda bobo's, which we'll talk about later, but that's, I mean, a lot of brands. - But that's not where I started, you know, 'cause I didn't have permission, I felt like, to go right to Celestial. So instead, I found a tiny salsa company that had glass jars and had labels and was in, had to use jar filler and had to put it in there somehow. So I contacted salsa companies, 'cause that was the most like product. And I started to form these relationships. And they were all like in this community, and they were all really helpful. Everybody wanted to be helpful. - And it was called, and you'd call it Justin's, not butters, or did you have a name for it yet? (laughing) - No, when I first started it, it was Paragon peanut butter. - Okay. - And Paragon, so I wanted something that was really catchy. And so Paragon, I started calling it Paragon nut butter, Paragon natural, Paragon peanut butter, and my friends, they didn't know what Paragon meant. And they couldn't remember it, so they just started calling it Justin's. - I'm curious, when you were writing the business plan, what did it say? And again, you were writing the business plan for you or for the idea of bringing this to people who might give you some money. - A little bit of both. I was writing it for me, but I knew that at the end of the day, the business plan is what I would use to try to find the angel capital. - Right. - So the idea was, okay, let's say that this company's either gonna go public it big enough where it'll go public, or it's gonna get acquired. And so here's an estimate on your turn on invested capital, could be, and I had to write it in that perspective. Otherwise, nobody would want to invest, 'cause there's no end game to get their money back. - I'm curious, I mean, this is like 2003, when you're working on this. You didn't go to business school, you didn't have a business background. How did you come to the conclusion that you needed to write a business, like an ambitious business plan with an exit and with multiple returns and et cetera? Like was there somebody who kind of guided you or gave you advice? - God, great questions. So I got help from everywhere. - 'Cause you were probably a little naive, right? When you started. - Oh, big time, big time. So here I am at the library. It's a summer and it's the weekend, right? And a librarian comes up and it's like, "Oh, hey, what are you working on? What class is this for? I see you here every day." And I'm like, "Oh, I'm not a student here. I'm doing this for fun. I want to start a company." And you say that and a librarian's like, "Wow, that's really cool. Have you talked to any of the business professors here?" And I'm like, "I don't know anybody here." I'm like, "Would you like to meet one or two?" And so then now, I got to meet Frank Moise, who is one of the business school professors. And I got to, he was like, "Hey, Frank, "could you go through my business plan and give me input and tear it to shreds?" And so I had people like him who would give me advice on my business plan. I would meet with other founders of small companies and I'd be like, "Hey, how do you scale a company? "How do you grow it?" Well, it's gonna cost a lot of money and you gotta go out there and find angels. And I'm like, "Well, how did you find an angel?" Well, you gotta meet with this person. So then I met with someone who was an angel investor and I'm like, "Hey, what are the things that you need to see?" And being naive gave me an opportunity to ask really silly questions. And I met with almost every small company that I could get my hands on. And not only did Boulder have the natural food companies, but they had a natural food retailer here called Wild Oats. And they were number two to whole foods and we have natural grocers called Vitamin Cottage. And so I was able to learn all of these things and a condensed amount of time and fast track the whole process. - All right, so you get enough data to write the plan. You've got a plan and what's your goal? How much money were you looking to raise? - I wrote the business plan for Friends and Family. The idea was $35,000 was gonna buy me a grinder, buy some raw materials and some labels and then rent a kitchen time and have built enough inventory then to get started at a farmer's market. So I would basically take my business plan and I'd have a shoe box of jars that I would make with a food processor of different flavors. And I probably had about five that I wanted to launch with. And so I would go back to Western Pennsylvania and visit with my family. And you can imagine the, what's the right word here? It wasn't disappointment. It was confusion when you are studying to become a lawyer. And then you moved to California. I had a fantastic Jewish grandmother, Galatas Gold, Who? What about you? university, I was on work study and financial aid and at all this debt that I was going to have to repay. And then when I graduated, her gift was, she financed my college, which was incredible. But she was a real stickler on education and making sure I got a good career. And so, you know, I move out west, move to Colorado and I'm waiting tables and everyone's, and I'm like, yeah, I'm getting closer to go back to school, you know, I'm in a college town now and everyone's, so then I come home and I'm like, hey, I've got something I want to show you guys. I'm really excited about it. And they're like, oh, you know, is this a college application? Are you going back to school? And I'm like, and I take the lid off the shoebox and I'm like, I want to make peanut butter. Here's a plan that I wrote. And you know, and literally the first thing people say is peanut butter is fine. It's been like this for a long time. It doesn't need to change. Like, why do you think you're going to make it any different? Right. And some people thought was really cool. And so, anyways, so then I went to my friends and went to my family. My first investors were my uncle, my mom and dad and my sister. And then I was able to kind of, you know, get some inheritance that, you know, was being saved for me by, you know, my grandma. So I was able to get $35,000 together. And that's how I got started. All right. So you see, you've got about $30,000 from different sources. But you're still waiting tables, right? I mean, that's you need to like make money in your ganty and tips. And what, so with that, how are you going to start this thing? I mean, you've got a food processor at home, but you know from your research that you've got to go to like a commercial kitchen that's USDA certified. So you can actually sell this stuff. So I'm imagining the first step is like, find a place where you can make this. Yeah. So this, this took forever. So the first thing I had to do was I defined a industrial sized grinder. And I found out there's two types of grinders. There's a stone mill that has two grinding plates that come together. And the peanuts come through the grinding plates and the tolerance of the plate is what creates the butter. And then there's a food processor which is basically an impeller that pushes product through this circular cutting head. Yeah. It's called an urschel. They make soy milk. They make ketchup, all kinds of stuff. So right away, I'm like, okay, I need this urschel. New ones cost $75,000. And I'm like, okay, well, I can't get that. So I found the local urschel representative, Ted Deets and Ted like, it's like, look, I really shouldn't be doing this. But I got an old one that's 40 years old. I'm taken out of an old factory because they're buying a new one. I'll sell it to you at a really cheap deal. And so what was the price he sold it to you for? $3,250. Okay. So it's a great deal. And can I just ask a point of clarification? I mean, couldn't you just buy one of those peanut butter machines you see in a natural food store? Like I go to my local Oliver's in Sonoma County and you can put your jar under there and make peanut butter. Is that just too slow? So I talked to a few stores about them and they break down a lot. Okay. And so I and then you talk to other peanut butter companies because I mean, the first thing I did guy is before I even looked at buying equipment, I contacted a few peanut butter companies. Yeah. And I asked them, hey, you know, do you guys make peanut butter for other companies? They're like, yeah, we do stores, we do other companies. I'm like, that's great. Could you make it for me? And they're like, yeah, of course, send us your recipe. Send. And then we got to the rubber hit the road, which is the M.O.Q. You know, what's the minimum order quantity? Yeah. And it would be in the hundreds of thousands, you know, of units, just to turn the equipment on. And they're like, look, kid, we can't help you. But I tell you what, here's what you need to do. Like, and that's how I found out the type of equipment they were using. And I'm like, okay, I want the equipment that these big guys are using, but you guys, you know, that's what they use. And that's and someday, you know, I want to make 100,000 units in a production run. You know, and so that was the goal was to, how do I get started? So eventually I can hand this over to somebody else. I always had that in my mind. When we come back in just a moment, Justin begins to share his peanut butter with more people and learns when to listen to their feedback and when to ignore it. Stay with us. I'm Guy Ross and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Ross. So it's 2003 and Justin has finally gotten his hands on an urchal and industrial strength grinding machine for making large quantities of peanut butter. It's literally this urchal is like a jet engine, right? Yeah. And on one end, you put in a peanut and it literally you turn on. And you put peanuts in it. And it totally pulverizes them. And the other end comes out this peanut butter goo and it kind of drips out. Right. And I'd have to collect it into a bin into a stainless steel bowl. Yeah. And then now it's, and then from that stainless steel bowl, I'd have to add my ingredients, which is cinnamon cinnamon or how many powder honey or right. I was using liquid honey at the time. It is small enough percent that still worked. All right. I literally had to go to a restaurant supply store and I bought a stainless steel like soup paddle mixer. Yeah. And I would make maybe 50 pounds, 40 pounds at a time, you know, which is, you know, 40 jars, 30 and you scoop them into jars. And then I would have to pick up this big container, put it on like a roll cart that would be like, you know, chest high, pick it up, put on this roll cart and then I'll take a spatula and I'll spatula it into a hopper that was probably, you know, above my head. Yeah. And then once that hopper is full, you could stand under it with one jar at a time and you'd put, there's a little foot pedal and you'd stand on the foot pedal and it would cycle this jar filler and you'd hold the jar underneath it and it would fill it like ice cream comes out of a soft serve. But what happens is you fill it and there's a little bit of air in it. So you have to tap it on a table every single jar by jar. Yes. You cannot do this in your apartment. I would think that, okay, maybe I'll just find like some warehouse space and boulder and just do it there. That's not what you did. Yeah. So in order to sell to even a farmer's market in the state of Colorado, you need to have an FDA certified kitchen facility. The ceilings are clean and there's no road infestation or insect infestation and that there's a three compartment sink that allows you to sanitize all your, you know, utensils correctly and write those floor drains. Now you're right. I have to find a kitchen. And so what I did is I'm like, okay, well, I have the grinder. Yeah. Now I need the jar filler and the labeler. So who uses that equipment? Pasta sauce companies, salsa companies. Let's find one of those. So then I found a sauce, I called all the salsa companies and they're like, well, we use this shared kitchen facility in South Denver, about an hour, hour and a half for me. You know, we pay to use their jar filler and their kettle and their jar labeler. And so I meet this guy. I'm like, hey, how much does this cost to use this? He's like, well, I don't, I don't have any openings. You're like, we're booked solid throughout the day, making all these different products. And I'm like, all right, you were asking if you get time in this kitchen to rent. And here's what's interesting. So, so this guy, so the the classic thing for an entrepreneur is, is we can't take no for an answer, right? We've got to find a way to get to the yes. And this was the only place that had the equipment that I needed to be successful. And they were booked. So literally, it was like, all right, well, are you guys making product at 10 o'clock at night? He's like, no, you know, we close out at, you know, 730 every night. And I'm like, what if I came in in the middle of the night and you never saw me and it'll just be extra money in your pocket. You'll never know I'm there. And that's what we did is we went in on off hours at the end of the day when their shift ended is when my shift would begin. And at that moment, I was still waiting tables and I eventually switched to a different job on a side hustle in order to accommodate those hours. Yeah, I was going to ask. I mean, you're going for 10 and this is in Denver. So it's an hour plus drive, right? Yeah, an hour plus drive each way. Okay, so you're doing the overnight shift there. And did you have someone help you? Yeah, God bless, John Ikabone. So my first coworker employee partner was my roommate. He was chasing a career that wasn't something that was exciting him. And then he saw how passionate I was about this. And he's like, hey, I'm here to help. And the idea was you were, I'm assuming you're going to make a certain number of jars because they last to pin up our last a long time, right? It's not can last about a year. Not going to go rancid quickly. And the idea was I'm going to sell these at farmers markets. Yes, but it wasn't farmers market season yet. So now I'm trying to get it into stores like like natural food stores co-ops and boulder. Yeah, so in every store I went to said no, wild oats said no because they only wanted to carry you know a national. They only want to work with brands that could work nationally. So then I went to to some specialty stores. And they all said, okay, we'll think about it. And then I went to the co-op here and they're like, okay, drop off some samples, we'll get back to you. And then I went to this store called Great Harvest Bread. Have you ever been to one of those great harvest bread companies? - It's a, no, haven't. - It's a bakery, but they're franchised. - Okay. - And there's maybe 50 of them around the country. And there's one in Boulder, and I'll never forget. I went into a good, great harvest bread, and they have like honey and maybe some jams there, like a little retail section. And I told them about the peanut butter, and this guy Scott, Scott Crevy, he looks at me like I've got, you know, three eyes and he's like, you got peanut butter? He's like, okay, it's like, huh, interesting. He's like, all right, I'll take it. I'm like, are you sure? - That was it. - He's like, wow. - And he's like, yeah, he's like, you have any now? And I'm like, I'll be back in 10 minutes. You'll be here, right? And so that I went home. And I had samples and things, and I came back, you know, and I had a cell sheet that I made that had pricing, and then, so great harvest bread was my first customer in Boulder. And then I got into the co-op, and then I slowly got into some specialty food stores. - And what were your products? What were your, like, three products that I started with? I had honey peanut butter. - Okay. - I had honey almond butter, and then I had cinnamon peanut butter. And so when I first started, the almonds were natural, and then the peanuts were organic, and on top of that, what I was obsessed with was stabilizing the peanut oil. - So you wouldn't have that, like, thick layer of peanut oil when you opened the jar? - Right. - And the way that some brands saw this is by using palm oil. - Right, which is what we use. And honestly, when I first started, palm oil wasn't a thing. Like, when I first started, you know, I was trying with the shade butter, I was trying cocoa butter. You know, as I'm working on all these things, you know, palm oil is introduced as a hard and vegetable oil. And so it was now this new ingredient, and it's like awesome. It's a new ingredient. Let's use it. Wow, it works. It's not perfect, right? If it sits in a hot car for too long, or if it, or if you don't add it correctly, at the right temperature, so it melts perfectly, it doesn't work, but it's good enough, and it limits the oil separation, which I think solves a problem in the marketplace. - And palm oil we should mention, like, I think that sort of, there was a lot of controversy around palm oil for a while, because some palm oil is produced by clear-cutting forests, right? And so there's controversy around rainforest degradation, but you can also get palm oil that is certified, and that's sustainably grown, et cetera. But at that time, you're talking about 2003, very few nut butters were using palm oil. - Correct. So long story short, we don't use a ton of palm on our products, but when you have a food product that has two or three ingredients, you notice it. - Yeah. - And so peanut butter, people associate palm oil with a lot of peanut butter brands, because there's only a few ingredients, and in a lot of other food companies, they have more palm oil, or cosmetics, but they don't even list the ingredients. And so it's a little unfair, but at the end of the day, we still use it, we own it, and we have to step up and do the right thing. - And so it's just a tiny bit of palm oil to stabilize a peanut butter. Okay, but when you're going to great harvest bread company and these coops, and initially, give me your pitch. What would you say? I'm an owner of a store and you come in, and I'm like, I already, more selling peanut butter, what, like, why should I sell yours? - Right, so you have to know your audience, right? And I was so good at this. I'd understand, is it local that they really like? Is it something that differentiates on the shelf? Is it something that's the highest quality premium? You know, like, what do they feel? - Do they feel sorry for you? 'Cause you're just a kid. - Right, right. You know, the door behind them with their grandson. - Yeah. - And so, so if I'm at a specialty store, I'd be like, look, this is the most premium, top tier, grape, poupon, nut butter you can buy, and it belongs here in your store of all these fine cheeses and meats, right? Or you go to a great harvest and say, look, you know, this is, you can eat this with a spoon. You don't need to add anything to it. It can go on a slicer bread and you're good to go. You don't even need the jam, 'cause we have honey and we have cinnamon. Or you go to a whole foods or to a co-op in this case and say, look, this is a really unique product that, you know, that has differentiation for what you're already carrying. - In those first few stores, how much was a jar? - And this is like a 12 ounce jar or 16 ounce jar? - 16 ounce jar. - Okay. - I wanted to basically be the same as what was already out there. - Right, okay. - And you know, it's tricky, 'cause when your first getting started, you know you can't price yourself too high even though you should. So we're probably selling peanut butter for $6 and almond butter for $8 or $9. And not charging enough. - Right, what do you think your costs were to produce a jar of peanut butter? You know, probably $4. And so I was making virtually no money on any of these things and it was a hobby. This wasn't for me to make money. This was for me to build something that someday could be a business that makes money. For me, it was real. I treated it as a business, but I'm working on waiting tables. Now at this time in my life, I'm working at REI, which is a sports retailer. And I'm not paying myself. I'm paying my roommates. I'm paying the kitchen I'm working at. I'm everyone else except me because I already have a job. And I know that if this thing works, eventually I'll get paid. - And you are in some of these stores, how were you selling, I mean, how, I mean, if they're just sitting on the shelf in a store, how were people discovering them? Were they, did anybody buy them? - No, no one was buying them. - Right, so I would, I'd set up a demo. So I would dedicate time to set up a table and I would hand out samples. And that's where the farmer's market down the road became such a great revenue for us. - Because you're standing at a table and you can talk about this thing. So imagine the farmer's market was probably a really important sales channel. - It was so important. So now it's into the winter. And it was tricky even getting the farmer's market because we're not an agricultural product that's grown locally. - Right, 'cause peanuts are grown in, what, the sourdough? - The sourdough. - Yeah, the, ours are from primarily Texas and New Mexico 'cause it's a drier climate. - Right. - So the farmer's market says, "Yeah, I don't know, I don't have this a good fit for us." And you're like, "Oh shoot, like, well, I'll tell you what, "I'll make a deal with you. "How about we'll come in early in the spring "before all the farmers start to harvest their vegetables "and once all the farmers come in and the honey vendors come in, "if there's no room for us, we'll leave." And then we'll come back again in the fall when more space opens up because you'd rather be selling something than nothing, right? And then once I got in, you know, and there was probably the first farmer's market a week or two, they kicked this out 'cause there wasn't any room and people complained. They're like, where's our nut butter? And then all of a sudden I was able to get a little corner, you know, not a full 10 by 10, but a little corner and I could, you know, slowly work my way in and become a regular. - What were people attracted to? The honey peanut butter, the almond butter, the cinnamon butter, like what kind of reaction are you getting from people? - It's the whole experience. Like people which is love to buy a product from someone that they can look in the eye and be like, you made this? Wow, that's really special. And the other thing that really helped guys, like, we're the only nut butter company there. So it's not like you're at the store price shopping for what is the cheapest? Do you like, well, I need peanut butter and there's the only one here. And so that was really fun. The biggest learning for the farmer's market for me was two things. Number one, I realize you can't make everyone happy, right? So eventually someone's gonna come by and be like, you know what, I don't taste enough honey in this. Or you know what, this is too sweet, too much honey. And then they're telling you, can you add less honey? You know, and you're like, you know, oh yeah, yeah, of course, I'll work on that. You know, and then after like a year, you're like, you know, it is what it is. If you don't like it, I'm sorry. But I'm not changing it, you know, 'cause when you first launch, you wanna make everyone happy. And you're like, okay, well, how do I create something that everyone's gonna love? And then you realize, okay, I just gotta put my, you know, line in this hand. This is what it is, I'm not gonna change it. The second thing I learned, which was so fun for me to learn, was when I first launched, you realize I didn't have like a playing peanut butter. Everything had a flavor to it. 'Cause that was, to me, that was the big point of differentiation, right? So, you know, you have the farmer's market and someone comes along and they're like, oh my gosh, this is so exciting, you're brand new. I'm gonna take the tour. I'm gonna try them all. And maybe I had four or five different products. 'Cause I would come up with some specialty ones, like pumpkin pie or chocolate or something, you know. And so someone come and say, okay, I'm gonna try them all, and they'd be like, oh, the honey, oh, that's really nice. It's really, really subtle, but I really like it. Oh, there's a maple, a maple almond. Wow, that maple's really compliments the almonds. I really like that. And okay, here's another one. Oh, the pumpkin pie, oh, that's just too much nutmeg for me, too spicy. Okay, what do I buy? I wanna support you, so I'm gonna buy something, okay? So, what should I buy? Hmm, what should I buy? Well, do you have just plain peanut butter? And I'd be like, no, no, I don't have plain, like, why would i play and you get playing at the the grocery store Well, you know, I really like you and I really like supporting local and and I really want something I can have every single day not just on a special occasion like the cinnamon would be once in a while And then I was like oh my gosh, well that's interesting So then the next week I came back with classic right not plain now nobody wants something that's plain right So it was a it was called it classic and guess what it became our best seller Right because people just wanted something simple now. I'm scratching my head I'm like well, I thought the flavors or what was important But people just want to support something that's local and that tastes good All right, you're getting feedback from people and you're adjusting to it But here's the the big picture right you're working at REI you're waiting tables You're making peanut butter in Denver and you're Demoing it at a farmer's market at least one farmers maybe two on the weekends Like that's a grind of a life like you're living off your other jobs Yeah, I'm I'm certainly breaking even you know on good days But I was having so much fun like it was fun to be in a community of other entrepreneurs of other Food companies, but I knew that it wasn't gonna last forever I knew I had to figure it out and I didn't have a girlfriend. I didn't have a dog I'd this was all I wanted to do so as I'm in the farmers market I'm like okay scale is what I need and then when the farmers market ended For me it was like okay once I get into whole foods like game over you've done it You're just gonna have this big company and let's get the whole foods like that's the goal Okay, so that became my obsession is how do I get into grocery food stores? Okay, and this and when you say when the farmers market ended just seasonally it ends it ends in correct right in like November or whatever the idea was And and this is a time 2005 2006 when you could walk into a whole foods It's harder now because it's you know it's owned by Amazon But it you could walk in and get the store manager and they would you could get them to put a product in their store At that time like you could have that conversation was that did you do that in 2005 or six? I mean or not not quite yet So 2006 was when I started to deliver to retailers and here's how it started I Had a kind of an idea of how this might work and so then I walk into the one whole foods That was in our town as could the grocery buyer is and that the buyers you know at that moment in time stocking a shelf and and I walk up I'm nervous and I'm in my 20s and and I've done this a few times but not with whole foods and so I I asked the buyer who's like wearing knee pads and he's you know, socks something in a low low shelf and I'm like Hey, do you have a second? I ask you a quick question and this guy's name's David David Spice and and he's like looks up at me He's like, yeah, come on. You know spill it spill it because I got lots of to do here And I'm like, hey my name's Justin I have a food company and I really want to sell it to as soon as I said that you could kind of see I lost them right he's like God, you know kid I hear this five times a day like he's like all right stands up It's like look here's what I need you to do I need you to get into a food distributor called you and I fire Yep, you know you and I fire is who distributes all of our food products once you work with them Then I can bring you in and I'm like oh that's simple. I'm like, okay, hey, thanks I'll let you know when I get into you and a fire and so then I go to you and I fire They're like oh we can't get you just into one store because we have this big warehouse and in order for us to get Enough economies of scale to deliver to enough stores. You need to be in at least 30 or 40 stores Which is usually the whole region and I'm like well? I don't want to be in the whole region I don't have enough capacity for that. I just want to be in a few stores and she's like well, you know Maybe they'll make an exception and just work with you and I'm like well, oh Okay, I get it so it's gonna be harder than I thought so then I go back to Pearl Street and I find Dave Spice who's you know again working in the store and so the next time I came in I was ready like hey, Dave. It's Justin Hey, I went to you and a fire and they said that they can't just deliver to your one store so what if I come in and I'll check my own shelf and I'll deliver just what you need and then I'll walk it out to the shelf and I'll stock my own shelf And so you'll you'll never even have to worry about it right well That all sounds great Justin, but you know I'm nervous as a new product no one's gonna notice it are you gonna be able to support it? And I'm like how about if I'm here every day and I'll do a demo and at the end of a month or two if we don't sell enough jars That makes you happy you can take everything off the shelf give it to the staff take it home and it's free It's on me and you'll never see me again and if I only was like oh my gosh, he's like Okay, fine like take your jar take it over to you know this person at scanning and let's get it set up in the system and We'll see you next week, but you're starting in this one store and Boulder Starting at one store and I thought that by getting into the store it would be this big unlock Once I was on shelf I kind of thought okay everyone's gonna notice it. It's gonna be great and then like nobody really noticed it I had to stand there like three four times a week and hand out samples and get people excited about it But still like the internal optimist is like okay, well, hey, this is just one store Let's get into 30 stores because then once you and a five has it but you can't get into 30 stores if you're not doing well in one store Well well enough right and like you know So so you get into the store and maybe like you know two weeks goes goes by and it's like okay Well, I got to get into another store because I have a I can at least service 15 stores So now you go to the Whole Foods across to the next town over and you're like hey You know David over it up Whole Foods Pearl. Well, hey, he just brought us in you guys should be carrying us here And they're like well you and you in a fight. Oh, no, no, no, I'm gonna deliver it I'm gonna stock my shelf and I'm gonna do demos and like well Okay, well David has it then I guess I guess we'll try it and then you know You really leverage that one relationship and then I would get into more and more stores and I would deliver to these stores and I would Be kind of like you know for me it was like all right well Pearls doing okay, you know and and his other stores if I can get them to do what Pearls doing and now I can get into 30 or 40 of those You know the targets always moving so now the targets move from getting in the farmers market to getting into Whole Foods All right now I'm in Whole Foods now I got to get into UNFI So I can get into more Whole Foods and then I'll then I'll have made it and so the targets always moving and How many stores were you I mean How many stores are you able to get into just going store by store on your own and doing your own deliveries? So 2006 I'm like two or three years in I could deliver to specialty stores I could deliver to natural grocers and I could deliver to wild oats into about 10 to maybe 12 Whole Foods stores So now I've got I've gotten into about 25 stores. Oh, so 25 stores. Okay, so and at this point I think you were you're ready to go to to UNFI and they Became your distributor, right? This is like like around 2006 I guess and you're now getting into stores all over like Colorado and Texas and New Mexico So at this point like how much were you doing in sales were you or you breaking a million? Yeah, no, we were probably around 150,000 dollars in sales right and so you were really tiny tiny Yeah, and and the thing about peanut butter is the velocity of it right? So the velocity is how often it moves off the shelf and for a consumer you might buy peanut butter Once a month if you're a heavy consumer once a week or once every two weeks and so it just wasn't flying off the shelves like like a Bar or an energy drink would because you have one every day So now I'm you know, I'm a few years in I'm working, you know now at R.E.I You're still working at R.E.I Doing all the stuff. Okay, how many shifts were you doing at R.E.I by the way? About three or four days a week I look at R.E.I part-time and is mostly is mostly to maintain the minimum to get health insurance Right because they are right they provide insurance. Yeah, yeah All right, and and at this point I realized that This isn't working because now I have real data like oh, yeah I was a little overly optimistic on how many you know jars. I was gonna sell my first year at this pace It's gonna take me a lot of stores to get to the scale that I need to You know break even I'm like oh man. This is so now reality is setting in and when I would get really I don't know Nervous or upset I would go an exercise, you know going a big bike ride going a big trail run You clear my mind come back exhausted and just feeling refreshed The next day and so I'm on a big mountain bike ride, you know, and this is now 2006 2007 and I'm on a bike ride and I'm eating a squeeze pack of an energy joe Yep, and as I'm eating the energy gel. I'm like, man, you know this energy gel is good But why isn't I really want peanut butter? Why isn't anyone putting peanut butter into a squeeze pack? It just comes to you like that. Well it makes sense right? You're more of these like I'm obsessed with something Yeah, yeah, I'm with peanut butter all day every day. Yeah, and here I am with a gel pack You know, and I'm like and I just put one and two together and it's like why isn't anyone doing this? Holy cow When we come back in just a moment just in quickly discovers why nobody is putting peanut butter in a squeeze pack and then decides to do it anyway Stay with us, I'm Guy Roz, and you're listening to How I Built This. I'm Guy Roz. So, it's 2007, and Justin has just come up with what he thinks is a brilliant idea. He put peanut butter in a little squeeze pack so people can eat it on the go. I'm like, "Well, how do I find out if I can even make a squeeze pack?" So, I talked to a few friends, I've made a lot of friends now in the natural foods community, and one of them was the founder of Boulder Chips, his national potato chip brand in John Maggio, and I talked to John, I'm like, "John, I got this great idea. How can I find out if someone can make it for me?" He's like, "Well, just like there was for peanut butter, a contract manufacturer, there's contract manufacturers for squeeze packs. Here's three that I found for you, the largest three in the country. Call them up, see what they have to say. And so, I'd call them up, I'd be like, "Hey, my name's Justin. I have this natural foods company in Boulder, Colorado. I'll open you could put my food product into a squeeze pack." Oh, yeah, of course. No squeeze packs too big or too small. You were squeeze packs, are you? What are you doing?" I'm like, "Oh, wow, this is really great. I'm doing peanut butter, I'm doing almond butter. I want to do a chocolate hazel." And they'd be like, "Whoa, whoa, whoa, you can stop right there. We're not going to be able to help you." All three of them just said, "No, flat out, outright said no." They're not going to be able to help you. Why? Because of food allergies, the nut allergy. That's where it finally showed up. And again, these are companies that are making what? Energy gels or what, like, what are they? Everything, mustard, mayonnaise, ketchup, hair conditioner, honeyp sticks. Anything that comes into a squeeze pack, salad dressings, these guys are doing. So they will not do peanut butter for obvious reasons because they're. I mean, I say this as the uncle of a kid with peanut allergy. It seemed like every school, every daycare center, every youth organization was banning nuts. And it just would go on and on. So I can understand why some of these brands were like. or companies were like, "We're not touching that because we, you know, people are freaking out about this stuff." Yeah, the liability was too great and you'd have to label on the product process in a facility that handles or shares a line with. And, you know, nobody wanted to do that. And at first, as you can imagine, I was kind of devastated. I was like, "Oh, I had this great idea." And it was going to be so fun. And now no one can make it. And then it was like, "Wait a minute. Maybe if I'm the only one who can make it, I should make it." All right, well, now I've decided I'm energized. Okay, well, how do I find a squeeze pack machine? I got to make it myself. And this would be really interesting. And so then the goalposts have moved again. Once I get the squeeze pack, it's going to fix all my problems. Yeah. So anyway, so I get really excited and inspired. And then I find out that these squeeze pack machines, as you can imagine, are hundreds of thousands of dollars. And so finally, like through calling around, I find a equipment broker who sends me to someone out of New Jersey. And this guy has a company called Protopack. And they basically would take these old machines and refurbish them. So I start talking to him. He's like, "Well, you know, I got this machine. It does one at a time." Back in the 80s and 90s, you'd open the Sunday paper and there'd be this squeeze pack of Perl, hair conditioner. And it was that machine. And it's been sitting here collecting dust. And I'll happily sell it to you. And I'm like, "How much?" He's like, "Well, it'd be about $30,000." And it's like, "Oh, man. 30,000." Okay, well, okay. So if that's 30,000, I'm going to need to kitchen to wire it into, because it's not going to fit in this salsa company. I need one in Boulder. And so at this moment in time, I'm like, "Well, to get that, I need $75,000." And I went out to my family. They didn't have any more resources for me. I talked to a few angels and they were like, "Excuse me? A squeeze pack of peanut butter to do what?" They're like, "I don't know. Too risky." So I had nowhere to go. The only place that I could go, and God bless them again, was my roommate, who was helping me with the farmer's market. He was helping me make it at night, and I went to his parents, and lay down the idea, show them the business plan, and his parents loaned me $75,000. Wow. That then allowed me to go out and buy this machine. Now I needed a kitchen, and I found a kitchen facility in Boulder of a company that had just gone out of business. But it was too big of a facility. I couldn't use it by myself. You couldn't put this in the salsa place. Correct. It was too big. The size of a small car was the squeeze pack machine. And so I was able to find another company that was also growing at that moment, and they were a few years in, called Bobo's Oatbars. So, barrel and eye, the Earl Stafford, the founder of Bobo's. We shared a kitchen together, and we'd work like, we hired some employees, and we'd share them. And on even days we'd make Bobo's, and on odd days we'd make Justin's, and we had the squeeze pack machine, now hardwired into this facility. And so I'm making these squeeze packs. Can I just ask, I think the packets could be the game changer, because now it's like runners and people doing outdoor activities. And I imagine, because you had, you're in 40 stores, right, you could make the case. Hey, can we add the squeeze packets as another skew? Is that right? Is that fair to say? It is. And so I went to Whole Foods, and I said, look, you know, in Boulder. You went to that store. In Boulder. Okay. And I had this great idea. Here it is. Here's the sample. It's for athletes, and it belongs right here with the energy bars. And I don't want to sell it to you in a five, because I just want to sell it to a few stores and see how it does. I've been working this for the past year and a half. I'm so excited. It's going to crush. Let's, you know, can I put, oh yeah, Justin, we see you're all the time. Yeah, we'd love to have, let's put an energy bar section. We'll put it right next to the Lara bars, and it'll be great. And it doesn't work. It doesn't sell. This is one store, first of all, in one store. Okay. And so in the energy bar section, assuming this is where people are going to look for this, right, because you want a quick hit of energy, right, instead of getting food or whatever gel. But I was using it for exactly. Right. Okay. It makes sense. And it doesn't move. So after a few months, the buyer is like, hey, Justin, you know, these squeeze packs aren't really moving. I'm probably going to have to ask you to remove them because, you know, I feel like the test is over, and we're probably not going to bring them in. And to me, the squeeze pack, this was the big idea. This is what was going to, you know, elevate the brand and set us free and put us in every, you know, R.I. and running store and, you know, and be this big athlete food. And so I was devastated. But instead of just, you know, pulling it off the shelf and giving up, I literally stood at the shelf and watched people shop for, you know, half an hour. And it came really clear to me that when people, I know this isn't like, you know, earth shattering news. But when people go shopping, they're in a rush. And so it's so hard to get people to try new things. And the problem was people would see it. They'd pick it up. They'd be like, oh, this is a squeeze pack where my bars are. It says protein on it. It says energy on it. I don't understand. Like, what do I do with this? What is it? Like, I don't, and then they would just ignore it. And so at that moment, it was like, oh my gosh, rather than try to force this to be an energy food, people don't know what it is. It's just peanut butter in a squeeze pack. I should just sell it next to the jars. And that way people will, you know, they'll know what it is instantly. And boom, like, it started to work. People started to buy them. And when I started to learn was the number three reason why people were buying the squeeze packs was for, you know, portable protein. And I was like, oh, well, that's why I created it. I'm glad. Put it on fruit. Put it on, you know, on piece of toast. That's great. The number two reason I learned why people were buying them was for portion control. And then the number one reason why people were buying the squeeze pack was for a trial size. Like, you know what? I saw a squeeze pack of almond butter. And I've always wanted to try almond butter, but it's too expensive. And I don't want to take the risk. But, you know, I'm going to buy this squeeze pack and see if I like it. And, you know what? I really like almond butter. Turns out I like your almond butter. So I'm going to buy your jars. And then what happened is the squeeze pack became this trial vehicle. So now our jars that weren't selling that well started to pick up. It's kind of crazy just by moving it from one aisle to a different aisle that it actually has that much of an impact. Like it just shows you how kind of crazy consumer behavior is, right? It's the same product. It's just moved two miles down or three miles down. Yeah. I mean, it was really like an eye opener for me. How lucky I got. So now I'm like, okay, all this is working. Now I'm like, oh no, like the word is out. I couldn't patent protected. I didn't invent peanut butter and invent the squeeze pack. I couldn't protect it. I couldn't do anything. And now my secrets out and people know. And you know what? What if this natural food company starts making squeeze packs and what if a squeeze pack company starts, you know, in the now paranoia really like. grabs a whole debut. And I'm like, okay, well, I got to raise money and I got to move fast. And that's when I started to continue to revamp and rewrite the business plan and then really go for angels. - And I guess someone who helped you raise money was guy named Lance Gentry, who you soon brought on to help manage the business, to manage Justin. And I guess he had a lot of experience. I think he'd been a former executive at Izzy Soda's, which was another brand, started in Boulder, right? - Well, so it took about a year, but here's where things went a little interesting. Lance meets me and he's like, hey, I'm looking for my next career. I really like what you're doing here. I think I can help you. And I look at him and I'm like, good, 'cause I could use some help. - Yeah. - And so then we get together and he's like, all right, well, tell you what, you need to raise money because you can't afford me and I couldn't. And he's like, you probably need a million dollars and that's gonna allow us to hire a few more people, including me and then let's rebrand the packaging, let's update it so it looks a little different and I'll help you go out there and try to raise the money. - He was gonna connect you to investors. - Yes. - So, all right, a million dollars, you're proving this out, right? At this time you've got you and if I distribute your stuff and are the packets also being distributed to 40 stores, are they just in that one whole food? - I had to go to every single store and talk it in. And you'd have to like work this system and get people to want to help you. And the biggest advice I can give to an entrepreneur who's doing this, I kept a notebook. And in my notebook was the names of all the stores and the people who worked in those stores. So when I would walk back into Houston, Texas Whole Foods, I'd been in in a year, I would have the names of all the people I'd met a year ago and I'd memorize the names before I walked in the store and I'd write a description of what they looked like and maybe kids they had or where they grew up. And I'd walk into that store, I'd see that person and I'd call them out by their name and tell them a little story about what I remembered and it would blow their minds. - Yeah. - And they would be like, oh my God, if this guy remembered me, the least I can do is help him. And it was so important. - All right, so you have this goal to raise money and you've gotten the nut butters in a lot more Whole Foods and you've got the packs and I'm not, you know, gonna surprise anybody here, you do raise the money. I think it took you about a private year but you raised a million dollars from angel investors. So now Lance joins you, right, to help you. And what is he, what, you're the CEO, I'm assuming is he, does he take an operational role or more of an advisory role or what? - Yeah, Lance was, he was everything everywhere all at once and wherever we need help, Lance is there. If it's working on production, you know, Lance is there helping with production. If it's meeting with a retailer, Lance is there. If it's marketing is his genius. And so Lance's title was, was president, you know, I was CEO but really like, I was working for him because he knew what he was doing that I was learning. - Did you like that? Did it feel like, okay, finally there's like a grownup here to help me? - Yeah, I really did enjoy it. I felt like, I didn't feel like I was alone anymore. I felt like I had someone who was not only more talented than I was but was in it as deep as I was and felt like a real partner in the business. - And did you start to see results right away with Lance like, was he able to scale fairly quickly where you start to see like, I don't know, $5 million in sales that year or something like that? - Right away, the first thing that happened was we got into Starbucks with a squeeze pack and they put us into a bistro box, which is, when we're still there, it's like their protein plate little grab and go. But in order to get into Starbucks, we had to have a food audit and our little shared kitchen space with bobo's wasn't cutting it. And so we had to find a food manufacturer who would overnight take our existing peanut butter making process and put it into their facility where they have full sanitation team, parts and maintenance team. They have employees that are, you know, come in all the time and so we literally took this whole room and moved it into their facility and they made a bunch of other food products there. And then they had the credentials and the licensing and the auditing that Starbucks needed in order for us to be a customer of theirs. And I kind of like, told them we already had these things hoping that if they accepted it, this food company would want to bring us in anyway. - Right, so they take your equipment, they're running it. Okay, so you start to see, I mean Starbucks huge deal. It sounds like Lance is a transformational guy. The business is growing, you're now like 2009, you've raised the money, you're getting into 2010 and I think that year was, there were a lot of setbacks. It's actually not the year you expected. What happened? (laughs) - So 2010, I'll just set the stage. We're in Starbucks nationally, right? We're in Whole Foods nationally. We are now getting a lot of conventional retailers like Kroger and Target to notice us. And in Lance, who is my mentor, my hero, and kind of everywhere all the one sky is diagnosed with brain cancer and has two young kids and then within a year passes away. And so now it's 2011, 2012 in Lance, is not only like, not with the company, but he's dead, like he's gone. Did was he ill when you started working with him? - No, it was crazy. - He was just like, one day he had a headache and then the headache lasted three days and then he went to a hospital and then they did a brain scan and they found a tumor and he had no idea. So then, at that moment, not only did we have to grieve and as a company, these maybe there's eight of us, pause what we're doing and really like honor someone who was a dear friend of ours and be there for his family and he was a larger than life human and so the whole community was really in shock. But we had to get back to work and I had to step up into a really powerful leadership role where I had to show empathy and courage but also roll up my sleeves and be like, all right, we've got to move on because the world isn't going to wait for us to be ready and that was a really, really hard moment for me. And then at that moment in time, my wife was pregnant with our first and so a little bit after he passed away, we brought a child into the world. And so now I have a business and running on my own, a newborn and I think I'm no longer working at REI now so I left REI for five years and all this stuff's happening all at once. So, I mean, this becomes your focus, right? And without Lance, I mean, were you on your own or did you have other people that could sort of, you know, that you could lean on and rely on for advice? - Yeah, the beautiful thing about the Boulder community is I had a lot of great people I could lean on for advice and get, you know, support from. But at that moment, I kind of knew like, you know, I had a window of opportunity and it was closing because, you know, people were noticing us. We now had a national brand and we were in Starbucks and people were like, okay, this squeeze backs a real thing. And so now I felt like, okay, I need more support. I need another adult in the room. And that's when I started to look for institutional capital. - Outside investors, yeah, are bigger, more money and maybe a private equity or somebody like that. - Yeah. - All right, so the packets are working and you've got the nut butters. And you decide to move into peanut butter cups as a really interesting idea, right? An elevated version of Reese's peanut butter cups, but like Reese's peanut butter cups, it's iconic. I imagine it dominates the category. But you felt like, hey, this could be the next thing. Imagine, but it's also a shift, right? 'Cause it's kind of going into candy like you're going into a slightly different category. - Yeah, so the idea was, if Reese's can't sell a peanut butter cup into whole foods or into any natural food store, then someone should and why can't it be justins? We already make the best peanut butter. Reese's wasn't even a competitor and where it really caught me by surprise two things. One is the velocities in peanut butter cups are much higher than jars and even squeeze packs. People will eat peanut butter cups every day if they could. Hopefully they don't, but so the velocities were higher and then people would come into the franchise in a whole new way. So now we're in a different part of the store. They see a peanut butter cup, they buy it. They're like, wow, this is really good. Now they're walking the store and they're in the peanut butter aisle. They're like, oh, these guys make peanut butter and almond butter. Now it was this surround sound in the store in an amplified both sides of the business in a really critical time. Okay, so you've got these out there, but you need to scale and grow and you know in the back of your mind you're looking for institutional money. What did you have to do to attract a big institutional backer who is going to be. put in significant cash to help you guys really scale because you're, you know, you're doing 20 million a year in 2012 still small, but maybe attractive to a private equity group or a VC firm or something like that. So we had a really, you know, we had a fast growing company and a category that was notoriously stagnant. We had an innovation with the squeeze pack. And so we were, we had a really good brand story. And so we had an opportunity where we could really interview and partner with who we want to partner with. And I really wanted to work with a local group because I really felt like supporting local was the right ecosystem for us. But then I met a group out of San Francisco called VMG and dang it like these guys, they specialized in, you know, in kind bar, pretzel, Chris, pirates, booty. They knew exactly how to scale food companies. They had a great track record. And so I didn't take the best deal that was offered. I took the best partner that was there that knew how to help me scale. And it requires a level of sophistication to make sure that everything lines up that, you know, you have to hire the, make sure you have the right people and know how to do that. Right. When you brought in, when VMG, I think they invested about $47 million initially. Now you've got a big private equity firm behind you, which is great because there's cash, but there's also complications. You've got to, it's a different beast now. And they need a return on it. What kinds of challenges did it create? I mean, now you've got, it's not just these small angel investors. It's a big professional private equity group. Yeah. We're about a year in and one of my board members, Peter Burns, who had just left celestial, was ready for his next thing. And so I was able to recruit him to come and become the CEO. And at first I was like, hey, let's be co-CEOs. And he's like, okay. And then I saw what a really amazing, fully functioning like CEO can do. And I was like, oh my gosh, like, hey man, this is yours. You can have it. I'm going to focus on quality, on culture, on marketing. I'm going to go to all the sales meetings. I'll be there for trade shows. And I focused on my stuff, which was making sure that our messaging and quality was right and tight. And this is the magic of having Peter, because Peter knows how to set expectations and how to manage large private equity groups. Expectations on how things are going to happen and how we're going to grow the company. And he had the experience to do that, which would have probably eaten me up. And so he was the pro. And I guess he becomes a co-chief executive and you guys are now working together. And I mean, what were you able to do with that? I mean, imagine a lot, with that infusion of cash. Yeah. So what we did is we hired really intelligent people who had experience working in food companies that were scaling as fast as we were. And so we're developing new products, getting into more stores, and we are trying to grow outside of just groceries. So we're getting into REI, and it's everything is just working. It was like it took 15 years to push this boulder up the hill, and now I was sudden it was rolling down the hill. Did it also drive you to start thinking about selling? No. It didn't. I was, advice I got early on, which was you build the best company that you can build, and don't go out and try to sell a business. Have somebody want to come and buy it. And so I was so head down, all of us, so head down focused. We knew that someday we'd have to take out debt to pay back our investors or go public or get acquired. We knew that was in the horizon. But we were only three years in with VMG, and they generally five years is when they say, okay, let's start to think about what's next guys. We need our money back. So we're three years in, and we were just building a really healthy business. And in larger companies started to reach out to us to say, hey, we love what you're doing. We would love to know if you'd be open to a conversation to be acquired, and that's what triggered a process to kind of figure out, okay, maybe this is a good time for us. And it was Hormel, who initially came to you, and eventually you guys would come to terms and accept an offer in 2016. They bought the brand for $280 million, which was certainly a great outcome for even for the VMG investors who put in $47, $46 million a few years earlier. What was your, you would end up staying with the company for another five or six years. But before we get to that point, I mean, I can't imagine, it was, I mean, 13 years you were doing this. So this was really now a chance for you to, and maybe you were able to take some money off the table when VMG made an investment. Right. But now he was a chance for you to really see like some significant cash from 13 years of work. Yeah. Yeah, it was overwhelming. And it was, it was complicated, right? So it was the most joyous moment of my life to realize this great opportunity to set yourself free financially and everyone in the business was an owner, every single person had an equity stake. So we changed everyone's life in a meaningful way. But at the same moment, I had sold out because you know, when you're a small independent business in a liberal values oriented organization, being independent and being, you know, local is so important. And when a large company buys you, you kind of feel like you've sold out. But what, what I did, which I'm proud of, as I stayed for five years to learn, we stayed in Boulder and everything kind of continued on in a great way. If someone's going to acquire your company and they want to scale it and grow it and turn it into a larger company, I would like to learn and figure out how they, what the unlocks are so I can maybe either do it again or help other companies achieve that. So I was really excited to stick around and to learn anyway. And were you going to be the CEO or what was the role you were going to play? That wasn't even an option. I was going to be, you know, kind of the founder on the sidelines. But I would, I would input with, with innovation and with purpose and with mission and culture and things. All right, you ended up staying with Justin's under Hormel until 2021 and then you took a, a position at Rudy's organic bakery that makes gluten-free bread and organic bread. But I'm curious about what happened in your view to Justin's maybe after you left or even as you were leaving because it was struggling. Like Hormel did not, I mean, they, they recorded, you know, losses. They were not able to, for whatever reason, accomplish what they want to accomplish with the brand. What's your take on what happened? I think to Hormel's credit, there are, I don't know, a $6 billion company that's been around 110 years. Like they clearly know what they're doing. They're good people who run that organization. And Justin's was such a small company that they just didn't know how to run a company of that size. And then when they integrated it into all the functions of the Hormel portfolio, the people there didn't have the focus on the Justin's brand because that wasn't paying their bills, you know, Skippy and Dinti Moore stew and spam was paying the bills. And so Justin's didn't get the focus that it needed to be successful. But to their credit, the Justin's brand didn't fall off a cliff. They didn't change all the ingredients. They didn't try to turn it into Skippy. But it didn't grow. It's just kind of been frozen right from when it was acquired to right where it is today. It's just been on cruise control. And so during COVID, I wasn't being utilized. I wasn't helping the company. I was maybe even getting in the way. And so it just didn't make sense to continue to stay there, especially when, you know, a company like Rudy's really could use some help and you support. All right. So you are kind of, you sort of move out of Justin's. And I guess, I mean, you're now at Rudy's and, you know, working on this new project, helping them as kind of advising them. And I'm assuming you thought that was kind of your life with Justin's nut butter was done. Like that was, that chapter was ended. Is that fair to say? It's interesting. So yes and no. So when I first left Justin's, I was pretty upset. It was like a bad breakup. You were upset because you felt you were kind of marginalized during COVID. Yes. You left in a bad way. Not in a bad way. I was let go from the organization. They need you anymore. They need you. I was a line item that was in adding value. And so I was crossed off. And I was like, oh my gosh. Like, what do you mean you're firing me? Like I didn't do anything to get fired. And like, it was just bizarre. It was so bizarre to me. And I was angry and I was resentful. And then I, you know, went through all the phases of grief. And then I was like, okay. And then I went through, you know, acceptance. And then I went through joy. Like, oh my gosh, my life is mine. And I can do whatever I want. And I can go live a sabbatical in another country. And I can do other, help other companies. And, you know, I'm set free. Yeah. All right. So you go away and you're working on other things. and just in the rearview mirror sort of. But I imagine people still were coming up to you all the time and saying, "Hey man, I just bought your nut butter. I just bought, I'm buying your nut butter every week." And people are still say that to you. And maybe part of you felt really happy about that and part of you felt frustrated by that 'cause it wasn't yours anymore. - Wow, yeah. I would often times lie. If someone who's like a peripheral friend was like, "Oh, hey man, how's business?" I'd be like, "Great." 'Cause the 20 minutes it would take to explain what happened and what I was doing wasn't worth it. And so I would just, it's great. And move on. But then I just accepted it and was really proud of what we accomplished and what we did and the disruption we created and proud to still see it on the shelves. - Okay, so Justin's is in the rearview mirror, right? And then it's not anymore because you would eventually get approached to come back to the company. This happened fairly recently. And I guess now you're back involved with it again. Can you tell me the story? Like how did that happen? - You know, it's kind of a, every entrepreneur is a dream when their company isn't living up to its fullest potential. And usually what happens is a company falls off a cliff and is barely salvageable and the founder comes back and buys it for pennies on the dollar. But by then it's too late. You can't revive it. You just have a corpse. But what happened here like we talked about earlier was Justin's is just kind of frozen. It's just kind of on cruise control. And this one investment group out of Connecticut, I'm forward, their founder is a young super intelligent, always smarter than me guy. This kid Matt leads and Matt had just come off of another fund and started his own. And he's found kind of his sweet spot, which is finding brands that are kind of trapped under a corporate umbrella that aren't living up to their full potential and pulling those brands out and then giving them attention and focus and building them back, building them up, maybe back up and then finding a better home for them. And so he loves the Justin's brand. He grew up with it, right? Like he's a kid. He grew up with the brand and he's like, so at one day he calls me up and he's like, hey, I've been trying to pull the Justin's brand out of Hormel, what do you think about coming back and being a part of it? And it's like, okay, here we go. So they acquired a part of Justin's. Hormel still owns a little over half of it. And so this group for consumer products bought about 49%. They bought 51%. 51% okay. Controlling interest. And they brought you in as part of this investment? Yeah, so I'm an owner and I'm also a board member, but I'm not a board member. I'm a founder. And so I don't just go to board meetings. I'm there for all the big calls. I'm there at the office almost every day and I'm a big part of the team, but I'm not running the team, which is a blessing for me. So what is the prospect now? I mean, now that it's partially owned by Hormel, partial and the majority stake is by this group forward. What, how do they then turn it into a return? I mean, is it then eventually one day going to be sold again? I mean, what's the long-term sort of play? Yeah, so it's to do what should have been done in the first place. It's to grow the company to reach its full potential. We really think that we can double triple quadruple the size of this business. And then once we build the business and get it to a size that is larger, I could go anywhere. I think that the opportunity is to find it a home where it can continue to thrive. Just by being a bigger business and then being acquired by a larger group will give it a healthier opportunity to be integrated because it's because now the size demands that it gets attention. Just when you think about the journey you took, and it was from really from experimenting and a kitchen to selling it, it was about 13 years. And the outcome was really great for you. And then of course, you had the difficult departure, but now you're back to this thing that you started, how much of what happened were you got to and just the outcome, do you attribute to the work you put in the grind and how much do you think had to do with luck, you know, right timing, the right product, the right place, et cetera. It's probably 50/50. I think that I don't take no for an answer. I worked hard when most people were, you know, parting and traveling the world at a young age. But if I wasn't in Boulder, Colorado, if I didn't have lanced and find me, and I didn't find Lance in the moment in his life when he was hungry and ready to prove himself, if I didn't go on a mountain bike ride and was eating a lot of squeeze packs, if Reese's hadn't done a great job at training consumers, I want a peanut buttercup should be like and I could make one organic. And all these things lattered up into success. And I can't take credit for all of it. But if I didn't work hard and take no for an answer and surround myself with people who are smarter than me and take direction, I wouldn't be where I am and I pinch myself every day for how lucky I've been. I don't deserve, you know, nearly as much credit as everyone else does, but because my name's on it, everyone's always gonna, you know, look to me. - That's Justin Gold, founder of Justin's. And by the way, if you're wondering what might be next for the brand? - I like the joke that, you know, we're gonna go into skincare. We're gonna come out with, you know, peanut butter, deodorant and peanut butter, shampoo and conditioner, some crunchy, for exfoliation. So, you know, the sky's the limit. But at the end of the day, protein snacking is really kind of what's not gonna go away. - That's where the opportunities are. - Yeah, I mean, we, I mean, sparkling peanut water. I mean, how refreshing does that sound? (laughing) - Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And if you're interested in insights, ideas and lessons from some of the world's greatest entrepreneurs, please do sign up for my newsletter at gyros.com or on Substack. This episode was produced by J.C. Howard with Music Composed by Routiner of Louis. It was edited by Niva Grant with research help from Alex Chung. Our engineers, Repatric Murray and Robert Rodriguez, our production staff also includes K.C. Hermann, Chris Messini, Catherine Cipher, Carrie Thompson, Carla Estevez, Sam Paulson, John Isabella, and Elaine Coats. I'm Guy Raaz and you've been listening to How I Built This.