Lily’s Sweets: Cynthia Tice

Hey, really quick before we start the show, we have an announcement about a really exciting new thing we're launching, a newsletter, and like our show, the newsletter is designed to be interesting, informative, inspiring, and most importantly, fun. It's 100% free. And to sign up, just visit gyros.com. That's g-u-y-r-a-z.com. [MUSIC] If I had to identify my greatest skill, it's probably self-awareness. And I knew what I was good at, but I also knew what I wasn't good at. Which is building a team. Yeah, it's hard. And also to provide information to people so that they can do their jobs to delegate and train. Yeah, you're not a delegator. You want to do it yourself. It's not only that, I just don't have the time to train you. Like my kids would call me up and go, "Mom, how do we do this?" And I'm like, "You know what? I don't have time for this." I figured it out, you should too. [MUSIC] Welcome to How I Build This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. [MUSIC] I'm Guy Ross, and on the show today, How Cynthia Ties started her first brand at an age where many people are planning to retire and grew lily sweets into a $400 million business. [MUSIC] Over the past decade, we've learned a lot more about how sugar impacts our bodies. Sugar, along with refined carbohydrates, is connected to chronic inflammation, which, in turn, is connected to conditions like type 2 diabetes and heart disease. And this growing awareness of sugar and its downsides has led to an explosion of new products that use sugar alternatives. Many of these alternatives, like stevia or arithritol or allulose, have only become popular in the past 10 to 15 years. And what they offer is satisfying sweetness without the inflammation, without having any impact on your glucose levels. And so if you go to Whole Foods or Sprouts or even Costco, you'll now see a lot of snacks and treats that have less than a single gram of sugar per serving. And none of these products are marketed towards diabetics. They're targeting consumers who want to eat a bit of junk food, but without the sugar or even carbs. And one of the categories that's seen explosive growth is chocolate. Since 2017, low or no sugar chocolate sales have more than doubled. In 2024, Americans alone will eat around $350 million worth of low or no sugar chocolate. And one of the brands that was way ahead of the curve was Lillies. It was launched back in 2011 by a food consultant named Cynthia Tyson. At the time, Cynthia was helping small grocery stores source natural and organic products. And she knew that stevia had just gotten approved for use in food by the FDA. She also figured that if used in the right way, you could make a pretty good chocolate bar using stevia, a bar that didn't taste all that different from one that was packed with sugar. Now at the time, Cynthia was nearing age 60. She never thought about starting a brand herself. But when Lillies' chocolate bars hit the shelves of Whole Foods, they were an instant hit. Now for the first few years, the business was mainly run by just four people. Two of them, Cynthia's kids. Barely 10 years after its launch, Lillies was acquired by Hershey's for more than $400 million. It was an unlikely turn of events for Cynthia who never imagined she'd build a multi-million dollar brand. Let alone in the latter half of her professional life. Cynthia Tyson grew up in the 1950s and 60s in and around Philadelphia and went to Temple University. She came from an entrepreneurial family. Her dad and uncle ran a small chain of clothing stores in the area. Although Cynthia's younger brother went into the family business, Cynthia was not encouraged to do the same. You know, my dad and my uncle were very old school and they were also quite concerned about the women kind of getting in and getting involved in causing problems. It took me perfectly, Frank. They felt that it would be just best for the men to run the business and if the woman wanted to do something else. I mean, they could do something else. No one did. No, you know, I was the first woman in my family to be college educated and I was also the first woman in my family to not get married when I was 20 years old. So then it became, you know, once I graduated college, it was like, what am I going to do next? So at that point, I was living in center city Philadelphia after college and I started to be a waitress and it drove my father crazy. Why did you drive him crazy? Because he was like, I did not send you to four years of college for you to become a waitress. It's a great job though. You get tips, I mean, right? I thought it was fine. And you know, my last year of college was an interesting year because that was when I really got into natural foods. This is in 1974 where natural foods was, I think, I mean, it was still very hippie-ish. It was really California, right? There's probably pockets of it in like Vermont and other places. You're in Philadelphia. Yes. So the way that I got into natural foods was that I didn't feel well. I was like sick to my stomach all the time. And one day I'm sitting in the cafeteria at Temple University and I'm eating lunch, complaining, as I always did, that I didn't feel good. And some random guy next to me and I never knew who it was. I don't ever remember seeing him again. But he literally turned around and said to me, well, no wonder you don't feel well. Look at what you're eating. And what were you eating? I probably was eating some fast food, item and coffee. But I do remember how striking that comment was to me. Like it literally was like somebody slapped me across the face. And I began to research diet and I changed my diet radically. I stopped eating processed food. I just started to eat whole grains and fruits and vegetables. I just started to feel better. I was so excited about feeling better. I became like a zealot. And I used to go home for family dinners and brown baguette. By this point, around 75, there wasn't a lot of stuff going on. And Philly, but there was some stuff. There was a natural food store called a scene. There was bread and circus that existed in Boston. There was Mrs. Guches in California. California where I grew up, we used to go there. My mom would buy a carob chocolate, which I hated. It was disgusting. It was so awful. But yeah, Mrs. Guches. And this was in the mid 70s. I think obviously there were supermarkets in America. There were a lot of supermarkets. But the supermarket revolution was still unfolding. There were still small grocery stores that people shopped at, right? Yes. A lot more than today. A lot more independent grocery stores. A lot more. But what ended up happening was during the time where I was trying to figure out what I wanted to do next. My dad was going crazy because I was a waitress. He came to me and he said, well, if you wanted to open a store, why don't we open a store for you? What kind of store do you want to have? And I was like, oh, OK, yeah, let's open a store for me. I want to have a natural food store. So that was in 1977. And he literally lent me 10 grand, which I never paid him back, but it was technically alone. And he helped me find a location, which at that point was on South Street in Philadelphia. Yeah. And it was really small. It was like a 400 square foot store. But I had a friend who owned a natural food store and we decided that we were going to join forces and open a bigger store together. And that was in 1980. And so, OK, so you had this, I mean, you had this opportunity to open the store because you came from a family of entrepreneurs. They had a men's clothing shop. So how much guidance did you get from your dad about running a business? Because, I think, as you would have admitted at the time, you were just a couple of years out of school, no experience in retail, maybe watching your family, your dad, and uncles. But did he give you some pointers? No. He, I remember that when I got my first bank statement, I was like, oh my God, what do I do with this? I did not know how to balance a checkbook. And I'm like, dad, I really need some help. And he's like, well, I'm really, really busy. Take it to the bank and tell them to help you with it. So I walk in to the bank with an envelope full of checks. And I lay everything down in front of the teller. And I'm like, my dad told me that you would help me balance this. Yeah. Yeah. I was like, I don't think so. So then we hired a bookkeeper, which was really useful. Was it, you know, in those early days, a profitable business? I mean, you still had to pay rent and you had to buy inventory. And so like, you had to manage a business, and it had to be sustainable. It was almost never truly profitable. But back in those days, I was single. I really didn't care about money. I truly didn't. I lived in a really small, not good apartment, in a bad part of town. And I just really didn't care. I was on a mission, but the profitability was really bad. Yeah. And, you know, we would barely, barely, barely make it. And that continued for, you know, really for years, really until I sold it. I mean, it was always like hand to mouth. Were you happy? I was thrilled. I was thrillingly happy. I just felt like I was doing something that I loved, that I could support myself with, that was good for other people and the planet. It was so fulfilling. And I just, you know, I loved it. In the 80s, natural foods was for like, kind of fringy people, right? In that sense that it wasn't like today where it's just mainstream. But I think in 1989 something happened that began to turn the tide. And I remember this. And this was the A-lar scare, right? Because at the time, apples were coated with this substance. It was called A-lar. And there was some connection between A-lar and cancer. And this was like a big deal, it was all over the news. And all of a sudden, I guess people started getting interested and wait a minute. I don't want that on my food. Was that a turning point for natural foods? Yes. I mean, there were, you know, there were sort of several, but that was really a big one. Primarily because mothers and others really got behind it. And that was a moral streak, really. Maral streak of all people was like big vocal about this. Very vocal. What we saw was people that had never before come into a natural food store came in for the very first time because apples, when you think about it, apple and apple juice and apple sauce is like one of children's first foods. Right. So, you know, it like apples became very, very scarce. Organic apples were like so hard to find. And, you know, but once people came in, it was a giant opportunity for us because, you know, my personal mission was to always make natural products more enticing. You know, what was to really like seduce people into eating more naturally? All right. So, there's this kind of turning point, at least an awareness from consumers that starts to grow. And really in the 90s, you start to see more and more people going into these stores. And so, did you start to see any kind of shift in your store in the 90s at all? I saw it there become more and more competition. And there was a big increase of, you know, larger format natural stores that were targeting transitional shoppers. So shoppers that would normally shop in grocery stores that were now going into these larger format natural food stores that had a lot of expertise in merchandising. And we're willing to be more open to ingredients that small stores like mine were not necessarily comfortable with. Yeah. And, but I imagine you probably had a loyal customer. You people had, you had people who really shop at your store because that was their local and they'd been going there since 1980. We did. But, by that point, I had been married for 10 years. By the way, 90s. Yeah. And my children were 10 at seven. And I started to really get burned out. I was tired. I was tired of retailing. I had been doing it for over 20 years at that point. And I began to think that I didn't, that I wanted to try to do something else. Yeah. Yeah. And so, what kinds of things were you thinking about? What did you want to do next? So, you know, it was right at this time, actually, that the shift that you were talking about before was really in focus. You started to see consumers, especially afloat consumers, looking for organic products. Correct. And I had this light bulb moment when I went to a seminar that was developed by FMI. What's FMI? The FMI is a marketing institute, which was the big industry organization for supermarkets. And presenting at the event was Whole Foods Market. So we're sitting there and there's all these various topics. And by the way, most of the people in the audience are from the big supermarket channels. Oh, they're all from supermarkets. They're like, "Ack me is there and wait for Mrs. there." And, you know, probably Safeway was there. But they invite the Whole Foods person to sort of explain what they're doing. Yes. So, these are the. So, Whole Foods gets up and they're presenting their strategic vision. And they get done and somebody in one of the supermarket retailers in the audience raises his hand and he goes, "I just want to understand how you think you're going to. Like how you think your audience is big enough." Like, if you get every customer from the natural products industry to come into your stores, that's still not going to be enough. It's tiny. So, it's not things. And this woman, she goes, "Well, rest assured, we're not after their customers. We're after yours." The Whole Foods lady says this to them. The Whole Foods rep says, "We're after your customer's Safeway." Yeah. Wow. And it was just a shocking moment. They were like, "Wait, what?" It was a shocking moment. And then the light bulb moment for me came about because, you know, a bunch of other speakers get up after that. And these supermarket retailers are now like, they're worried, you know? They're like, "Uh-oh." And some other guy in the audience raises his hand and he stands up and he goes, "Because they had talked about the importance of educating the consumer." Like, their premise was, you know, what they were advocating was, in order to score these sales of like these higher priced items like natural organic and supplements and, you know, stuff without additives, you had to educate your consumer on the benefits. Yeah. So, this guy raises his hand and he goes, "What do you mean, educate consumers? How am I going to do that?" So just putting two and two together, you're thinking, "Wait a minute, I know this industry. I can help these conventional grocers make the transition to when they're going to have to serve these customers." Yes. Which I think is exactly what you end up doing for a pretty long time, right? Like, I think that the next decade or so working for like, like, local grocery chains and advising them on health food. Yeah. You know, I was making more money than I had ever made before. It was more fun. I was seeing my kids more. I was, you know, basically working out of my home because I would, you know, I would sort of generate all this information, you know, with my own computer and, you know, I had like a shelf in my office that I was like putting products on to measure them. So it was great. Okay. So you're doing this consulting at this point. And I imagine why you're doing consulting. A lot of people occasionally are saying to you, "You know, Cynthia, you know so much about this industry. Why don't you start your own brand?" Like people probably said that to you from time to time. They did. I had people who were saying to me, "Start a brand. Start a brand." And I began to think, "Yeah, you know, maybe I could do this." I believed that I had the expertise at that point. Like, you know, I really understood what it took to create a brand. I really understood all of the expenses involved with launching in supermarket. I, at that point, had been working with other brands. So I began to have relationships across the country with some key retailers like Whole Foods and Wegmans. And, you know, so I had relationships where I actually knew buyers. And I knew I knew what it took, but that was what was so daunting to me. Like, it was like, "Oh my God, this is. It's a lot of work and a lot of money." And I was very nervous about it. I was peaked, you know, my interest was peaked. And tell me, I know at the time you were introduced to a woman named Elizabeth Fisher. And the two of you started working on your very first product together, which was of beverage, natural sugar-free soda. But I guess you guys kind of hit a wall pretty soon after why? What happened? So we developed a product and this was right at the end of 2007 and right at the end of 2007, Cogum Pepsi announced that they were coming into the diet beverage segment with a naturally sweetened diet beverage. And that's spooked you guys. We dropped the project. You dropped the project thinking there's no way we can compete with them. Correct. So we decide to pivot to chocolate. To chocolate? Yes. And so tell me why chocolate? Well, chocolate is my favorite food. But for me, especially as I got older when I passed that 50-year mark, I really, really was trying to avoid sugar and I really, really wanted to eat more than a small square or two. And I was seeing that there were brands that were beginning to pop into existence that were utilizing other sugar alternatives, notably multital, as their primary sweetener. But the problem with multital was that multital is a sugar alcohol that is intensively digestively upsetting. Now, people who were desperate to have their favorite food like a candy and didn't want each sugar would tolerate those digestive upsets. And in fact, I was one of them. Yeah. But what ended up happening was I had discovered stevia as a sweetener. Right. And stevia just to be clear is this natural sweetener that had just at that time been approved by the FDA for use in food. And in fact, it's what Coke and Pepsi had were just rolling out in their diet drinks, which I guess is why you guys decided to pivot to chocolate in the first place? Yes. So in 2008, Coke and Pepsi were experiencing this enormous downturn of diet beverages. And it was really due to the fact that there was enormous consumer distrust of artificial sweeteners of asperate. Yes. And Coke and Pepsi were looking for the holy grail of natural sweeteners because they were trying to rescue those sales. They saw in stevia the holy grail. Yeah. Because stevia basically comes from the stevia leaf. And it's a it's like, I don't know, 20 times sweeter than sugar, but it doesn't have the same. It's not sugar. It doesn't spike your glucose, right? Yes. There's no there's no impact on blood sugar level with stevia. But more importantly, it didn't have any known connections to, you know, to cancer risk. Right. And so when you and your partner decide, let's go into chocolate. What do you, what did you do? Did you like buy stevia powder like truvia and start mixing it with, you know, unsweetened chocolate wafers and melting it in your kitchen and pouring it into molds? Yeah. We did try putting some stevia into chocolate and I knew this chocolate tier and I contacted him and he was trying to formulate with it. But everything that we got back was really not acceptable. It was horribly bitter undertones and stevia, you know, stevia, especially when you're using enough to really sweeten something has, you know, has terrible aftertaste and, you know, it's like this almost like a licorice flavor and it just, it was terrible. It was the worst chocolate I had ever tasted in my life. When we come back in just a moment, how in the space of two years, Cynthia goes from the worst chocolate ever to a national rollout in Whole Foods. Stay with us. I'm Guy Roz and you're listening to How I Built This. Hey welcome back to How I Built This. I'm Guy Roz. So it's around 2010 and Cynthia and her partner Elizabeth are experimenting with stevia to make a delicious sugar-free chocolate. Problem is their first attempts taste really awful and then something else starts to go sour. During that time we experienced a falling out. You and your partner. Yes. And this is not uncommon a story we've heard on How I Built This Many Times. Yeah. We had different views and different expectations of each for each other and we had a series of small arguments that culminated in a large argument where we decided not to work together anymore. And was the, just to kind of dig in a little bit deeper because I think it's important with co-founders was the difference of vision around product or branding or design or all of those are. We hadn't gotten that far yet because we hadn't developed a product to work with. Yeah. It was truly personality. Right. Yeah. And so it just didn't work out and I think you guys decided to go your own separate ways and that's it. More or less. Yes. Okay. And so you, from what I was saying, you had developed this prototype of this chocolate that was not marketable. It was too bitter. Had you given up on the idea, did you think this is just not going to work or did you think there was still a possibility to make the feature something out? So I didn't work on it anymore. And then I discovered that someone had developed what I was looking to develop. They had developed a stevia sweetened chocolate. Yes. Was it a chocolate bar? They were selling or was it like a wholesaler? It was ingredients. So it wasn't somebody who was making chocolate bars. It was somebody making chocolate wafers for restaurants or whatever, whoever wanted to use it. Yeah. I was like, oh my god, somebody did it. So I requested a sample that came to my house in wafers. They're designed to be melted, presumably. Correct. And I tasted it and I'm like, oh my god, these guys are really onto something. And so what they had done was something that I never thought of doing, which they had used other sweeteners to mitigate the bitterness and the intensity of stevia. And so namely, they were using a rithroidol and some fibers like dextrin. And so they were able to kind of balance the sweetness with the bitterness out. Yes. All right. So you try their recipe and then what you, you, you contact them and say, hey, this is great. I'd love to see if we can work together. Yeah. And so I asked them to do some modifications, which they did. And are they also able to make chocolate bars or is that going to be a different place? That's a different place. Okay. First you wanted to just get the raw ingredients. And this stuff melted like sugar sweetened chocolate. Yeah. This was like the first thing that I had ever tried that was like, oh my god, this is good. Because it was basically what? Cocoa butter and cacao. It was cocoa butter and cacao and dextrin and and a rithroidol. And the cocoa butter gives it that like creamy, rich viscosity. And that mouth feel. And then you could just, you could melt down and add milk powder to make milk chocolate or you could just, you do dark chocolate if you want to keep it dark or salt. Yeah. You could put inclusions in it. Yeah. Okay. So you saw that this was, this had potential to be the raw material for sugar free chocolate bar. Yeah. Okay. But again, even now sugar free is still a little radical. Like when I say to people, try not to eat sugar to like really. And but there's a lot more awareness around ketosis, keto diets and, you know, and and how sugar can cause inflammation. Because when you eat like a like this is a time, we've heard about 2011 where paleo diets really start to get traction. Paleo doesn't allow refined sugar, but it does a lot coconut sugar and honey and some other things. Right. So again, like there, there wasn't quite the awareness yet in 2011 around sugar free right now there's a bunch of sugar free candy and chocolates that are remarkable and how good they taste. But, but why did you see an opportunity there? How did, how did you know that there was, it wasn't just going to be this weird candy thing? So I really, really wanted chocolate like this. And I believed that there were more people like me out there. Yeah. And I didn't want to compromise and taste. But I also didn't want to be particularly moderate. Like I didn't want to eat one little square of chocolate at a time in order to avoid sugar. And I, I just believed that that there would, there were going to be other people like me again. Yeah. So, alright, it's, it's now around 2011. You have this idea and I guess you start to look for someone to sort of go in on it with you, right? Like a partner. And I read that the person you connected with was a former colleague from your consulting career, a guy named Chuck Janardi. Yeah, we had remained friends since we stopped doing consulting together. Yeah. And he said to me, I've owned a little store in Seattle and I hate it. And my wife and I are getting ready to move. We've adopted a child and I'm looking for something to do. Do you have anything that we could do? Wow. He just did what great timing. Yes. And so actually he brought a few projects to me and none of them panned out. And finally, I'm like, well, I do actually have this other idea that I've been like sitting on. So I told him about Stevie and chocolate and he was like, let's do it. But I also told him that I was terrified to do it because I knew everything that went into, you know, that went into producing a brand. And right away you knew you wanted to work with him because you just you guys, unlike your previous partner, your personalities were better matched. You and Chuck. We were better matched. We had been friends for a long time. And so Chuck says to me, let's do it. Let's do it. It's really exciting. Let's do it. I have the money. You know, I have the money to do it. How much money did you think you needed to get off the ground? So originally I believe he invested $125,000. I didn't have that much, I didn't have money to invest. My dad invested $25,000. And we split the company 50/50 because I felt like that was fair. Yeah, I mean, that's, I mean, it's a great. I mean, he puts in all the money. But it's your idea. The money ended up, which I didn't 100% understand this in the beginning because I just was so green at the financials of business. I was completely green. And honestly, if I have advice to founders, it would be to fully investigate that better than I did because it turned out that the money was alone, which I didn't truly, truly understand at the time. Yeah. So, you know, initially Chuck came in with a small amount of money and we developed the packaging. And, you know, we had the recipe for the chocolate. And you had a manufacturer that could make the bars, make them into bars? Yes. I found a manufacturer that could make the bars here on the East Coast. And, you know, then I started to do the work that I was really good at, which was price architecture and, you know, a sales strategy. And we developed samples and I decided that I wanted to take this product first to Whole Foods. All right. Before we get there, did you have a name for it at that point? Yes. So, when we started to really put together the packaging and stuff like that. So, Chuck has a niece and she's 21 and doing really well. Today she's 21. Yes. Or maybe 21 or maybe even 22. Okay. And, but back then, she was seven years old and she had been diagnosed with brain cancer. Oh, wow. Yeah. And so she goes for treatment at Children's Hospital of Philadelphia. And she has surgery and she has chemotherapy and she has radiation. I mean, she really just goes through it. And she's in the hospital for a really long time and she finally gets out of the hospital. And she says to her mother, "Mommy, I want to raise money." And her mother says, "What do you mean?" And she said, "Well, in the hospital, she's like the kids get really sad because they're not able to eat together because there's not enough wheelchairs to wheel all of the children into the dining room in order to eat at the same time. So I want to do a fundraiser to buy a wheelchair for the hospital. So the family has throws a fundraiser and I'm invited to it because I'm friends with Chuck and friends with the family and they raise the money. So as we're conceiving of what to call this brand, we knew that we wanted to have a charitable component to it and we decided to call it lilies in honor of lily. After this girl. And to name nonprofits that support children with brain cancer or other serious illnesses as the recipients of our charitable donations. Wow. And lily is healthy and grown up today. Yeah. It's interesting because I didn't know that story. There's nothing on the packaging that tells that story, I think. Right. Yeah. There originally was. Like when we first launched on the back, it said lily, one brave girl and it told information about her. I think the reason why I point this out is that a lot of brands really push their social mission and I'm not convinced that that sells product. I think I think what sells a product is a good product. I couldn't agree more. The social mission is important for culture. It's important for motivation for the team and eventually can really be important for the brand. But but it's interesting because I did not know that about lily said it had this component because it wasn't really something that you you push front and center. Right. Exactly for that reason. I mean, we had large discussions that we did not want to be Alex's lemonade. We wanted to be a delicious chocolate bar that had a charitable give back. Yeah. And so the two of you are kind of developing this and Chuck puts in the bulk of the money with this loan to get you off the ground. Talk about that. So actually Chuck was the CEO, but that was honestly because I was so green of business that I didn't know that the CEO was higher than the president. You were the president. He was a CEO. I was the president and he was the CEO. But you know Chuck deferred to me a lot about business strategy because the truth was I had more experience than he did with doing this. And it was also my idea and I had found the recipe. So honestly, I was kind of bringing a lot to the table at that point. We worked really well together and he is, he's still honestly one of my best friends. So we put together the packaging and we found the co-man and the pricing and did all of that. And then we took it to Whole Foods for their category review, the Candy category review in August of 2011. And I knew that I was presenting to the grocery buyers, but I had a relationship with the, I believe he was a vice president at that point of merchandising, a guy named Earl Schweitzer. You knew him from just your consulting work? I knew him from my consulting work and he was their boss. So I was like on the plane with our prototypes and I emailed him and I just said, you know, I want you to know that we're coming in and I really hope that you can come to this meeting. It would be so great to see you. I would just love it. What did you bring? Did you bring a packaged chocolate or was it not yet packaged? No, we bought, we developed four skews. Okay. You know, my belief is that when you have an innovation, the innovation should stand on its own and you shouldn't innovate with flavors outside of the innovation itself. So I picked original or plain almond, crispy rice and I, and at that point, I did, I did sort of veer a little bit because coconut, there was a giant halo around coconut at that particular time. So we chose coconut as our fourth item and we take them to the meeting and we go walking in the door and the two buyers are there and we sit down in front of them and they're kind of, you know, I'm like, this is the next beck's thing to, you know, whatever the best thing in the world is. And this is 2011 when, when again, sugar free was still a diabetic candy. Yeah. We're sitting down in front of them and in walks Earl, Schweitzer. Yeah. And he sits down and they're sort of, they're tasting it and they're like, eh, okay. And somehow I have the wherewithal to look at Earl and say, well, what do you think? And he says, I think it's good. He said, I think it's good. He's like, it's not green and blacks, you know, but it's, it's a good solid chocolate that it'll appeal to special diet customers, which is one of our focuses. And the whole meeting changes, you know, the whole, you know, everything changes. And do they make any decisions of that meeting? No. They don't make any decisions. They just say, okay, thank you very much. And then we go home. You and Chuck. Chuck and I. I go home and we wait. And in the meantime, you know, so up until that point, just to kind of give you a sense, we've probably spent 50 grand in developing and packaging and getting the samples produced and you know in everything that that took. So you know, it hadn't been an enormous layout of cash at that point. And I had decided that if the Whole Foods didn't say yes, we weren't going to move forward. Like I, like Chuck didn't know that. You were not going to just try another retailer and you felt like it's Whole Foods or Bust? No, I was like, you know, this is, like this is so risky. You know, I don't know that I'm going to, you know, I don't think that I'm going to push for it if Whole Foods doesn't say yes. In November of that year, I get an email from Earl and it says, congratulations, you've been chosen as a national brand for Whole Foods and your launch is going to be March of 2012. Wow. Yeah. Okay. Pause for a moment. I'm sure you were super excited about that. I was. How many chocolate bars did you have to, how many orders did you have to fill a national release? Yeah. That's like tens of thousands of chocolate bars. It was a lot. Did you have the cash to finance that? So that's when Chuck was able to loan the business money. But again, like, you know, me being green, I was just super unclear about that. So he did and we were, you know, we were very diligent at producing what we needed. We met all the deadlines. We never had an out of stock. You know, I knew how to do that this part. I knew how to execute this launch. You know, it was seamless. So that co-manufacture was able to, you were able to finance that run and get it in time for January of 2012? Yes. Exactly. I mean, you were 59 at this moment. Yeah. 59 years old. First time brand builder. Well, it actually gets more interesting because because it was, it was, it was, it was alone when we got to signing or operating agreement papers. You and Chuck. Yeah, which were not signed until after we had procured, you know, the launch at Whole Foods. We decided that we would not take salaries until Chuck's money was paid back. So that would that meant that I had to work another job. Like I had to continue to do my consulting. Consulting work. Yeah. And in subsequent years. In subsequent years. Wow. While you're trying to build. Yeah. Lily's. Okay. So you've got this launch at Whole Foods. And where were they going to put the chocolate bars just with every other chocolate bar? Yep. And was it going to be the first sugar free chocolate bar or stevia sweeten chocolate bar? It was the first stevia sweeten chocolate bar because remember there were some multi-tall chocolates at Whole Foods. But they were not performing well and, you know, they were regional rather than national. Again, in 2012, when you launch this, because I think it's March of 2012, I'm thinking I go back to the story you told about that meeting of grocers and, you know, in Philadelphia in 2000 where they're like, who's going to buy your stuff? Whole Foods and they're like, actually, we're going after your customers. Yeah. But now I'm saying to you, who is going to buy Lily's chocolates in 2012? Who are these customers? Because it's got to be a tiny percentage of consumers at that point. Well, that is exactly what they thought and they were okay with it. Did you think that? No. I thought this is delicious chocolate that has no sugar. There's no reason not to buy it. I mean, why not have less sugar and less calories if you can still have the same delicious taste? I with you. I'm just saying there's a lot of skepticism around that. Well, there was, but I knew what to do, which was, I demoed it like crazy. So I hired demo teams all over the country and I did frequent promotions. So I did like six promotions a year, so basically half of the time it was on sale. And you know, it's pretty well known that promotional activity stimulates consumer trial. So consumers were trying it because, you know, there was a sales sign in front of it. And you were losing a lot of money that first year. I wasn't actually. You weren't. You weren't. No, I wasn't because we didn't have infrastructure that commanded expense. So we had no employees. It was me and Chuck. We weren't, we were not drawing a salary. We were, we had no physical structure. The co-manufacturer was, was packaging it and, and getting it and, and shipping it for you. Correct. I had no understanding that brands frequently have a pathway to profitability. Like that was not in my vocabulary back in those days. You thought you had to be profitable from day one? I did. Which, which I think most people shouldn't think, but they don't. Yeah. Yeah. So we lost money the first year. We lost a little bit of money, not a lot. And every year, subsequently, we, we were profitable. The business is still a small business. The business is a small business that is kicking, but I mean, it's growing. I don't think there was ever a year that we grew less than 40%. Wow. And most years, we were doubling. And in that, by 2014, let's say, do you remember, was your revenue over a million dollars? Oh, yeah. It was, it was almost a million dollars the first year. So you were going, you were like, but maybe by 2014, you were what, five, six, seven million dollars. I think we were probably at the five million. Okay. So in that first year, you're sampling it like crazy, just giving it to people. And that was enough to stimulate, I mean, that was, and the promotions was enough to stimulate sales. Yes. Yes. And how did you get the people to come back when it was more expensive to buy it again? I don't know, but interestingly enough, when we analyzed the effectiveness of our promotions later on, you know, when I had a new team involved and we were capable of doing those, that type of analysis, it was determined that price was not really as important to lilies as to other brands. And I believe primarily because our attributes were what people were really looking for. You know, this, this low sugar attribute, especially in a great tasting product, you know, was, was really innovative and disruptive and desirable. So Cynthia, you get into Whole Foods, right? And you're sampling it and clearly people are responding to this. You're like, wow, this tastes really good. And it's, there's no sugar. And then you start to add other product lines. Yes. I think chocolate chips. Yes. And maybe a milk chocolate. But I know that pretty soon into this, like 2014, Chuck step down as CEO. Did he also, did you guys also dissolve your partnership at that point? So lilies was an LLC and we bought him out of a number of his shares. You raised money from invests, from professional investors or from friends and family? No, from friends and friends. Yeah. Because you wanted, you needed more cash or because Chuck wanted, wanted out or what? He wanted out. He, you know, he wanted to enjoy his family and he really wanted his loans for a paid. So we paid back his loans, he retained some ownership and he actually found his replacement, a wonderful woman named Laura Fraga. And we continued to run the company virtually. My two kids came in and joined and we were from that point forward a team of four. Your kids joined you. They were now adults. They were young adults, very young. So was you, your kids and Lauren and you raised some money from, do you mind telling me how much you raised total from, from friends and family to just at that point? I think it was 350,000. Okay. So still not, you're not talking about millions of dollars. Yeah. It wasn't. And so and the cash flow, a loan was enough to sustain it. It was not only enough to sustain it. It was enough to sustain it in the midst of a law battle that cost a lot of money. All right. So now we get to 2015 because 2015, your old partner who you started the, the soda beverage that never got off the ground and then you looked into chocolate and then you guys went to separate ways. She comes back and she, she sews you and she claims and I've read the law, the case and she claims that this was developed together, that you had developed this business together and that she was entitled to some ownership. Yes. And so now you've got a lawsuit on your hands. So first of all, stressful. Super stressful. Yeah. And now you know that this is just going to consume a part of your life for some time. Yeah. It was it was one of the hardest and saddest events of my life. When we come back in just a moment, Cynthia emerges from a two year legal battle only to face another challenge, scaling a brand that only employs four people. with us, I'm Guy Roz and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Roz. So it's 2015 and Lily Suites is now a solid small business and growing steadily, but Cynthia has a problem. Her former partner is suing her, claiming she's entitled to a stake in the brand. So how did you deal with running the business and also dealing with the lawsuit? I don't know, I just did it. I had to do it, so I did it. I was really busy, I think the fact that I was so busy working and the company was doing so well was really counterbalanced, the heartbreak and stress of the lawsuit. But there was a lot of nights that I didn't sleep. That was where the stress sort of came in. But I was stressing about other things as well. Where are my chocolate chips going to be able to get produced? Did your lawyers feel like you had an open-air shut case? Did they tell you that? Did they make you feel that way or didn't they not say that? They did not make me feel that it was an open-air shut case. They believed in me and they really believed in me and they believed that I was not guilty of lack of fiduciary responsibility, which is what the case said. But they never said this is a guarantee. I'm curious, we did Insomnia Cookies a short time ago. In that story, the co-founder split early in the business and then many, many years later when a part of it was sold, the original co-founder sued. They went to, they got all the way up to the day of the trial and they decided to settle. It just went away. Was there ever any moment we thought, let's just do that. Let's just find some settlement and move on. No, because it was the very early days and at a certain point, her attorney offered a settlement son that I would never have been able to, like I couldn't have come up with it. So you had to fight it? I had to, yeah. But in the end, you triumphed, you won. Yeah. Yeah. Did it feel like a massive weight was lifted in 2017 when that happened? It did feel like a massive weight was lifted. It did. It did. It's really hard because humans were emotional, all of us. And especially when you were friends with somebody at some point in your life, we've all had these situations where those friendships unravel. But you do remember good times and so it's hard. It sucks. It does. Yeah. So once that passed, right, were you now, I mean now 2017, if you're growing every year, like gangbusters, you've got to be thinking, all right, to get to really to the next level, we've got to get outside investors in, like professional investors in. So I was not really thinking that exactly what I was thinking was, oh my God, this surpassed my wildest dreams. Because at that point, I was in my 60s. I love this. Yeah. You're in your 60s, your first time founder. Yes. Of a brand and it's like by 2017, what you got to be doing $25, $30 million in revenue. I was doing 20. We were at 20 and you had four employees. And our run rate by 2018, when we partnered with our equity partners, BMG, our run rate was 40. So beginning in 2017, once the lawsuit was finalized, you know, I really started to focus on, okay, what's the next step? Because probably, like if I had to identify my greatest skill, it's probably self-awareness. And I knew what I was good at, but I also knew what I wasn't good at, building a team. Yeah, it's hard. And also to provide information to people so that they can do their jobs, you know, to delegate and train. I don't have time for this. I figured it out, you should too." That's my delegation. Not good. I totally understand it impulse. And it is a certain, I mean, part of it is there's a certain type of person who's good at and part of it's training. People can learn how to do that. Yeah. Yeah. But you'd been a solo practitioner as a consultant for most of your career. For the whole career. Yeah. So you were used to working by yourself in your home office or whatever. Yeah. It was you. It was just you. Yes. And so, you know, the other thing that I understood was, you know, I said to my kids, "Do you really want to like get involved in a bigger way?" And they were like, "No, Mom, this is your dream. We don't want this." So, you know, I saw no succession plan for lilies, even if I continued to try to grow it and build a team. I spent like the whole 2017 doing due diligence and contacting different investors and different bankers and, you know, different founders and just, you know, really, really to try to figure out what my options would be. I ended up talking to a founder and she advised me to contact VMG. She's like, "Give Wayne a. here's Wayne's email address. Just email Wayne." So, tell me about the equity partners, VMG, the Velocity Made Good, their based in San Francisco, and they, I should say, do a lot of CPG investing. They do a lot of innovative CPG. Yeah. And the reason that I was so interested in speaking to them was that they tell themselves as very founder-friendly. And that was really important to me. So, I emailed Wayne and we started talking and like in January of 2018, they sent me a letter of intent and it basically was like, "We are super interested in you. You know, we'd like to make an offer. They made an offer." And it was like one of those magic things of like the figure that I was envisioning is what they offered. So we started to do the whole diligence process which was equally as stressful as the lawsuit I have to say. It was so hard and it was a tremendous amount of work. VMG was thankfully very patient and very nice because there were times where like I was like, "Oh, it was so much information." And you know, for people who've never been through the process, they sort of ask you to declare anything that you ever think could ever be a problem in the future forever. But they made it an investment in, was it a majority investment? They made a majority investment. They hired a woman, Jane Miller, to be the CEO. Her background is big CPG and her real expertise was building a team and managing a team and scaling. Within a month, she had found us as space for as an office in Boulder, Colorado. And they wanted to move it to Boulder because Boulder is such a food center, I think. And that's where she lived. And she lived there, okay? Yep. And then she proceeded to hire 40 people. Wow. And you became at that point more like a brand ambassador? Yeah. And that's like another topic which I actually think is a big topic and it's something that's like near and dear to my heart is like the topic of how do you utilize a founder in, you know, after an acquisition? Yeah. Because what did you want to do? You did not want to do operations. You didn't want to run a staff. Well, I didn't want to do operations and I did not want to rack reports, but I did want a job and I was not effective at communicating that. So initially when, you know, when Jane and I started together, you know, there was this big misunderstanding of like she thought I wanted no role and I was like, what do you mean I want no role? I want a role. We had to work through that. And it was, it was pretty painful. It was more painful than sending my kids to college. Really? Painful because, I mean, I understand, I think I understand this, but you got a big check right at that point. I got a nice size check. And probably more money than easily than you've ever seen in your life. Oh. And you never were rich. Never rich. And so you are, you know, almost going to hit 60 and wow, you get a nice check. There's things you can see. Yeah. You're thinking, no, no, this is my baby. I came up with everything. A logo in the formulation and I, you know, like I've been doing this now since 2012. Right. I wanted to work in some capacity. And I really, really encourage any founder to spend some time developing your own thoughts and communicating that effectively to your next set of partners. The old paradigm is that you have to wipe out the old team. But that's an old paradigm. It doesn't have to be the new paradigm. And as Jane and I understood that, we created a new paradigm and our relationship was really successful and we're really, really, really good friends. So what were you able to do? You didn't move to Boulder. You stayed in Philly. No, we stayed in Philly, but we talked about it. And she gave me jobs that were very, like I became sort of like the head of our charitable committee, which was an ongoing thing that we did. So we continued to give money to nonprofits. And that was really amazing. So you felt like, and I think this makes a lot of sense that there were things that you didn't want to do, right? And so they take it over essentially and start to manage and run the business. And did it mean that your life slowed down a little bit or a lot? So it wasn't that I didn't want to do it as much as I knew that I wasn't capable of it. I mean, Lily's was a category disruptor and it was growing beyond, you know, we, you know, it was, we hit the marketplace at the right time when there was this growing awareness of sugar. And that was the lucky part. And Lily's grew at a speed that no one really, including myself, ever imagined 110 million dollars in sales just 18 months after that investment. Yes. And massive. I mean, once you hit a hundred million dollars in sales and you're still privately owned, that's when the big boys start to like circle and say, wait, what's this brand? This is interesting, which is exactly what happened. Exactly. And, you know, we had a successful exit at the right time. June 2021, the acquisition was announced. Yes. It was acquired by Hershey's. Yes. 425 million dollar acquisition. You still had shares. Yes. You still had some ownership. You still had another bite at the apple, as they say, which is pretty amazing. Yes. And that was really it. That was sort of when, I mean, when you were, I think, out, out, right? I was. And I was really ready at that point. I was, you know, really ready. And I was so pleased and honored that Hershey's acquired Lily's. It was very synchronistic for me because Hershey's has this commitment to female leadership. And I, you know, by then I had enough experience with bigger businesses that I knew that there was no fit for me at a massive enterprise like Hershey. So, you know, I was, I was really, you know, I was ready to end that journey. And now, of course, it's a part of Hershey's portfolio company. And so, Lily's are everywhere. I mean, they're not just at Whole Foods or Walmart and targets. And obviously, there's direct-to-consumer sales. Yeah. Jane and her team did a fantastic job of getting it everywhere. And certainly, Hershey's is continuing that. Cynthia, I mean, when you were 58, you launched this business, right? And you are a very young 70. But God, can you imagine your 58 thinking, man, I'm going to, I'm, if somebody said to you, Cynthia, you're going to make a ton of money. Like, first of all, you, it wasn't on your radar at all, right? It wasn't on my radar at all. It's sometimes even hard for me to like believe it. Yeah. If that makes sense. And honestly, I would say, don't ever think it's too late if you have passion for what you're doing and you love it and you understand how much work it's going to be. Like, one of the things that was painful with the new team of Lily's was that, you know, I felt out of place with younger, you know, with everybody on the staff was like 40 and below. Yeah. But, but the truth is your experience brings you a depth of wisdom and don't underestimate that power. I, I do not think that I would have been as able to successfully launch Lily's the way I did without having had the breath of experience that comes from years of practicing your craft. Yeah. When you think about what happened in your life and in the story, and again, I just, I love that it was a late breaking development in your life. How much of what happened to you to attribute to all of the experience you brought in a hard work and how much you think had to do with the luck and the timing of it all? I mean, I think 50, 50. I think my experience was instrumental, but I think there was a big aspect of luck with regards to timing that I didn't really understand at the time. I took advantage of it, but I didn't, you know, I did not know that there would be this much interest in curbing sugar. So that was the giant luck factor, and it was giant. That synthetize co-founder of Lily's Suites. By the way, although she no longer works at the company, she is still a pretty committed booster. I eat a bar of lilies a day. A day. I mean, it's amazing. You can now have like a hot-budge Sunday that sugar-free. Yeah. I mean, you could have like a sugar-free chocolate fountain at a wedding. Yes, you can. We've had sugar-free chocolate fountains at parties. Absolutely. Absolutely. It's delicious. No reason not to eat it. I have dipped my finger in a chocolate fountain. What known as looking? Yeah, it's fun. 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. If you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, sign up for my newsletter at gyros.com. This episode was produced by Sam Paulson with music composed by Rumpteen Aero Bluey. It was edited by Niva Grant with research assistants from Catherine Cipher. Our engineers were Robert Rodriguez and Quacy Lee. Our production staff also includes Alex Chung, Carla Estevez, Devon Chorz, Chris Messini, Harry Thompson, John Isabella, and Elaine Coates. I'm Guy Raaz, and you've been listening to How I Built This.