MadeGood: Salma and Nima Fotovat Lost Their First Business.They Grew Their Next One Into a Snack Giant.

[Music] It took a lot. Like some of the things we said yes to, I think probably retailers went to many other suppliers first, and they said no, and they're like, "Okay, I guess made good will say yes." Yeah. We had one thing called the pizza box, or it had probably 13 different products in it. You know what, a nightmare it is in manufacturing to make one skew that has 13 different products in it? But we did it. We said yes to things, not because it was easy, but because we had to do it. There was the only way. [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 three siblings teamed up to create a bite-sized granola snack and grew it into made good, an organic brand that sold in tens of thousands of stores. [Music] A lot of the founders have had on this show started with a clear vision. They knew there was a product they wanted to create. It's just that they had no idea how to make it. Take Krishna Kalyanan, the founder of Kattelina Crunch. He had to figure out how to make breakfast cereal from scratch, or Ben and Jerry. They wanted to make ice cream, but they literally had to take a correspondence course to learn how. But my guests on today's show had the opposite problem. Nima and Salma photo that our brother and sister. And before they ever thought about launching their own brand, they already knew how to make snack foods. Their family business, co-founded by their dad, manufactured fruit and nut bars for other companies. They were co-packers. So they understood the machinery, the supply chain, production, inventory, all of the complicated stuff that goes into making food at scale. But what they didn't have was a brand. And eventually they decided to create one. Their first attempt was a line of fruit and nut bars that wasn't all that different from the products they were already making for other brands. It turned out to be a modest success. But for reasons we'll get into later on, launching those bars ended up with the photo vats actually losing their share of the business in a painful split with their partner. After the dust settled, they came up with a much more focused idea. Instead of trying to make just another snack bar, they asked a very practical question. How do you make a snack that parents would actually feel good about putting into their kids' lunch boxes? Something that's organic, tastes good, and is free from the allergens that so many schools worry about. So no dairy, no gluten, no nuts. That idea became made good. They launched in 2014 with bite-sized granola bites. Granola bars came next, then cookies, crackers, cereal, baked snacks, and a few ideas that didn't really work. But they kept iterating, kept expanding, and over time they built one of the fastest growing organic snack brands in North America. Today, made-good products are sold in over 40,000 stores across the US and Canada, and the company has sales in the hundreds of millions of dollars. Nima, Salma, and their sister, Saba all still work together at the company in Toronto. You'll hear from Nima and Salma in this interview. Their story starts long before made-good, of course. They grew up in Iran where their father owned a canning business. But in 1980, after the Iranian Revolution, a brutal eight-year war broke out between Iran and Iraq. Yeah, so I was actually born the year when the war started, and I remember the blackouts due to the war, and my dad would come out with his instruments and sing, or we would play games. So I remember it being a time of togetherness. But at the same time, I do have this one memory. There was bombings, and then we were forced to leave school early. So my grandmother came to pick me up and we're walking home, and the bombings are happening at that time, so we can hear them on the streets. And I'm holding my grandmother's arm, and I'm saying, "I'm not scared, but I don't know why my knees are shaking." So to this day, thunderstorms always remind me of the war. Yeah, as a kid, everything has a bit of a, you know, you don't know the depth of the problem. You're just taking it as it comes. You know, we're going to go and hide underneath the stairway because the bombing is here. It just becomes a normal part of life. Did you just get a curiosity? Because, you know, there was, I mean, a time, the Iranian army, or actually, I should say the Basige, which was the sort of the units that were working for the IRGC. They were recruiting boys, 13, 14-year-old boys, to go to the front lines. And I imagine, I mean, you were a kid, but I imagine it had to be in the back of your parents' mind, that it's simple. You might be recruited to go fight. Absolutely. They actually banned the boys from leaving Iran as soon as they turned 13. So you could not leave the country. That's why we left as a family, but the month that we left was a month before my 13th birthday. Wow. I mean, we probably can't delve too deep into it, but just for some context for people listening. I mean, the Iran-arach war, I was reading about it recently actually, and preparing for this conversation. And I didn't know it was still the bloodiest war between two developing countries in history. Do you remember your parents being really careful about what they said in the house, or even what they said around you, just because they were worried about, you know, I mean, you're living in essentially, you know, I guess you could say it to kind of a totalitarian society. I have a memory. I remember because my parents speak English. So when they didn't want us to understand, they would turn to English. And I do remember this, I caught like this separateness to your point guy. At home, we were able, we drank alcohol. There was music and all these things are banned in Iran. As soon as we left the house, we had to woman, even girls, my age, five, six, we had to wear head scarves and, you know, long coverings to cover our body and act in a certain way. So outside world was very different. And when I came home, it was a whole different environment. Yeah, we could talk about this for hours and hours because it's a just a fascinating story about what happened and just the contrast between life before and after. So your family leaves 1988, which is actually the year that the war ends. It comes with ceasefire. Exactly. We sold everything. We were ready to leave and they announced the ceasefire, but we still decided to proceed and we left as planned. I also would like to think that one of their main motivations was their girls because women's rights were non-existent. And our grandmother is very active in women's rights. And she was also very adamant that we leave the country so that her granddaughters could also have freedom, freedom of speech, freedom of expression. So I think it was for all three of us to have that freedom, opportunity, better life. So you guys get to Canada as kids. You were 13 or maybe 13. I was a, and we have another sister. Saba, right? Saba, yes. And she was how does she? She must have been around 10. Got it. Okay. So now you're in Canada. Did you speak in English? No. No. And did they put you right into public schools? Yes. The next day. I have a very vivid memory. I remember my mom dropping me off at the door of the school. Mrs. Palmer was her name. That was my teacher. And we were at the edge of the door and I was holding onto my mom's leg and her dress. And I wouldn't let go. So there was the whole half an hour back in four and I was like, I don't want to go. They look different than me. They don't understand me. It's very scary. What do you remember, Ima? I remember our schools in Iran academically. They were incredibly good. However, rigorous. Here the facilities like the gym instruments. I'm like the computer lab. The computer lab. I'm like, this is like a. Yeah. The access to all of this stuff for me was incredible. And the other thing that was different was that it was coed. So you sit beside girls. I mean, who doesn't like that? It's so funny you say that because I have the exact adverse reaction. I was scared of boys. The fact that we had boys in our class was a negative for me at that time. I want to ask you guys, but your dad first said because I know that he had a canning business back in Iran. He can't fruits and vegetables. And I guess that business did pretty well in Iran. And so once your family relocated to Toronto, did he want to do that again or do I'm assuming he wanted to start another business? Yes, he wanted to. start a business right away. He was at a mall one day, and he's walking, and he runs into a high school friend. They went to high school back in Iran, like 30 years before, 20 years before that. Randomly, they start talking. His friend, Allen, has come back recently from a visit to Iran. He went to the city of Esfahan, has an ancient recipe or an old recipe of Nougat candy. He's like, "Oh, I have this recipe on a napkin. Let's start a business together." - Wow, that was, that, so he says, let's start a Nougat business together. - Yeah, and my dad's like, "Okay, let's do it." - And I guess we should mention Nougat is a very popular. In Italy too, it's basically, it's like whipped egg whites and honey. That's the, and then you embedded it with nuts, but the base of it is whipped egg white and honey. And it dries into this chewy, okay. And so, so, your dad was like, "I'm in, let's do it. Let's start a Nougat business." - Yes, they ran to the 3,000 square foot facility. They bought used equipment. They had no food science background, and it sounds simple making Nougat's, but making Nougat is extremely difficult. It's a temperamental, the moisture in the air, the humidity, they thought it's an easy thing to do, but it ended up being a very difficult thing. - I was at Costco recently, actually, last week, and I noticed they sell Nougat from Italy, and I was thinking about you because, you know, there's, it's not flying off the shelves, right? It's not, I mean, it might be in Iran or in Italy, but, or in other Middle Eastern countries, but it's just not a thing. So, how do the Nougat business do in Canada? - Well, the insight that they had was that, why are North Americans not eating Nougat? There must be, we are onto something here. - Yeah. - Let's create something they're missing. So, it was a grind. If they were able to make enough money to just keep this thing going. - And I wanna add here, I think it's important context, 'cause our mom, the first job she had was selling vacuum store to door, and that didn't last very long. And the winter too, selling vacuum cleaner is door to door. 'Cause again, they had to do anything in order to survive. But she ended up getting a job at the Board of Education as a multicultural consultant. So, that helped, at least, bring a bit of, you know, stability into the family until Dad's business started to gain some traction. - Yeah, and I think about, about four or five years into the business, things do pick up for your dad, right? 'Cause he and his partner expand from Nougat candy into bars, like fruit and nut bars, and actually start co-packing business, like making these for other brands, like a white label business. - Exactly. Given that they were already making bars, all they had to do was to remove the Nougat as the binder and create a zero binder and add fruits and nuts and make your food nut bar. - Yeah, that makes sense. And meanwhile, you guys are all obviously getting older. So tell me a little bit about your involvement as kids with his business. What would you guys do? So, what do you remember? And would you guys go there on the weekends and like pack boxes and help out? - Yeah, I remember my first job in the summer was actually going into the factory and stickering bars because then have packaging machines at that time to do it. So I remember me and my sister would be lining them up and we'd race as who can do the more, you know, who can sticker the most amount of fruit and nut bars. So that was my first exposure into the family business and on the factory floor and we'd work right eight in the morning till four in the afternoon with one half an hour of lunch, but we'd be on our feet all day and we'd get $5 cash at the end of the day. - And Nima, you were, I mean, by 1994, when your dad starts to make these bars, I mean, you're almost what, 20. So you're in the, so you're trying to figure out what to do. - Yes. - But, and you have no intention of joining your dad's business. Like you don't wanna do this. This is not what you want to do when you graduate. - No, I was open to it, but I was trying to first figure out if I could do something on my own. I even looked at getting into the ostrich business. We went to look at ostrich farms. I wanted to start something for myself. - What you do with ostriches? - So I can tell you a lot about ostriches. - Ostrich eggs. - Ostrich meat. - Ostriches are the most productive animal because every piece of an ostrich you can use. So the eggs, the skin, the leather, the meat, but it just never has, never, thank God, I didn't get into the business 'cause obviously it hasn't taken off, but my dad's like, "Why don't you just come and join us?" I decided to go and work for him and made the executive decision to drop out of the universe. And when I joined, I was able to do everything because he was so small. So I ended up sitting in the front desk as the receptionist. I started to cut peos for ingredients. I've learned how to change ballasts on lights up on the ceiling. It's a tiny business and you gotta do everything. - When you joined, right? You're in your early 20s and you're working with your dad. And did you start to think about, this could be bigger or I have ideas here or not? - I did. I was very much eager to take over stuff. I am a doer. I like to do things. So I came in. I'm like, "Oh, Alan, you're doing payroll. Let me do payroll." - Alan was a partner. - Alan was my dad's dad. So first, internally, first I was focused on taking work from them so I could learn. And then once I started, in a few years, I started to say, "Okay, now I want to get into how do I grow this business?" And so I started to make calls. I started to look for customers. I'm like, "How do we get more customers? What can we make?" And so that's when I started to build a little bit of ambition. Once I got to know the inner workings of the organization. I think it took me a few years. Then I started to say, "Okay, how do we start to grow this?" - Yeah. And I guess eventually you and your sisters and your dad, you decide to take the fruit and nut bars that you've already been making for other brands. And then essentially sell them under your own name under your own brand in Canada. - Yes. - Being a co-packer, seeing what other brands were doing, having helped launch a few brands, seeing what it takes to take brands to market, gave us a backseat view of what it takes to build a brand as a co-packer. And so we took that and we decided to rebuild our house brand taste of nature and relaunch it in 2008. - You know, both of you know, making something isn't the challenge. It's selling it. It's the brand. Building the brand is really hard. So here you are, it's 2008. How do you build a brand? What do you start to do? - Get an advisor. - You bring somebody to help you figure out how to turn this into a bigger brand. - Exactly. Like what is brand positioning? Why do we need to exist? What problem are we solving? And it took us to a great design agency as well. And we came out with this kick ass artwork and design which really stood out on shelf. I thought it was, I mean, I can say it. - I was transparent packaging. - The transparent packaging. Half the bar was branded and the other half was completely transparent. It looked really sharp, really unique with white boxes which weren't that common. So we kind of really knowing that we don't have a lot of marketing dollars making sure the packaging worked really hard for us from day one. So that was the work that we did. And we launched a taste of nature in Canada in 2008. - Okay, so you had relationships with companies. And so how did you, I mean, were you able to get this product in mainstream stores, grocery stores? - No, it was very difficult. We didn't have relationship with retailers. We were doing co-packing. So I had no experience, no contacts whatsoever. The only thing I could get muster up was to get a distributor to list our products. Now what I needed was a broker, a sales agency, a broker because we didn't have our own sales, obviously internally. So what I needed was a broker and it was an interesting time because it was the same time that kind was entering Canada. - Right. And you're a competitor. - Exactly, yes. - Yeah, this is how business works, right? We had Daniel LeBetsch-Gianne and the kind of our story. And we know it's a tough business, the bar business, This is top. It's competitive and it can kind of really work hard to protect its branding and image and at times even threatened other brands that had clear packaging for example with lawsuits and did you kind of were you able to sort of stay under under the radar from all those battles at that time? Yes, we were in Canada so it was not a big market for kind. And until 2012, taste of nature was much larger than kind in Canada. And it sounds like that this really becomes the business, that it's really what you're making. You're making these bars, right? We're still doing co-packing, contract manufacturing. But how quickly did more revenue come from the bars or was it always coming from co-packing, co-manufacturing? No, it flipped on becoming taste of nature more and more. Co-packing became contract manufacturing, became less and less important. Now, it helped because it covered rent. It helped with investing in the brand. It was, I always say that this private label contract manufacturing is like having an investor because you generate the cash to put into the brand. How big by 2012, how big was the business in terms of revenue? Like was it over 10 million? Yeah, it was over 10. We had 100 employees. We hired HR. We started, it was starting to take shape. Departments were starting to take shape in the company. Professionalizing the business. Yeah. Okay. So, you're really gaining a lot of traction. 2012, your dad decides that he's going to split with his partner and sell the business. Tell me what you understand about that, about why that happened. As you heard, Saba Salman, I were the primary people that were running the business. And it peaked the interest of my dad's partner to be more involved, both from the next generation coming in. As well as, what is the purpose of owning this business? We were more thinking about reinvesting and growth and they were more thinking about dividends and taking cash. Sure. So, there were starting to be misalignments in different areas or values, principles. And it didn't happen in 2012. It happened. You know, these things don't happen overnight. It was brewing and it wasn't being resolved. And so to separate from an equal partnership is not an easy process. No. Presumably, there's a dispute about how to move it forward, which direction. Not unusual. We've had many examples of this on the show. It happens, right? This is the risk of starting a business with a friend is that it can also, right? People say don't start business with a friends and family. You guys did both. You know, I think part of it now that I think about it, part of it is also generational because us as younger kids or individuals in the business, we care less about taking dividends out and more about growth and growing. Older generation. Right. At this point in your lives, you don't need it as much. You don't need to cash as much. So I think there's disconnects in different areas and we thought that we would end up with the business because we were so deep in the business that anyone who would want to buy this business or provide financing to the other family, they would want to have management included. Essentially, they said, well, actually, you've made an offer, instead we're going to use the same dollar amount and buy the business out. Yeah. Correct. And on July 26, 2012, I was on my way to the office and my dad calls me that says don't come in. We were just delivered at check and we were bought out. Well, and my sister and I were at the office and I see all I could see are men in suits walking into a boardroom and these are men I never seen before in those. Very curious because we have a very casual office. So anybody in suits, I'm already like, what's going on? And our dad's partner's son comes and says we need to talk to you. This is urgent. Come into the boardroom. I knew obviously we had this bit out and I was like, I don't want to talk to anybody. I need a lawyer. I was so panicking. I try to gather my sister. We're about to leave and they're like, no, all this property is now not yours. Like, you can't take anything. I'm trying to take my keys and my cell phone like, no, if this is company property, you can't. So it was just very overwhelming and shocking that this was all happening. I don't even know how we made it from the office to our parents' house. But then we all gathered in the basement. I think there was a lot of mixed emotions. But each of you guys were going to probably get a little bit of money from this sale. I mean, your dad, I'm assuming it's going to get the most from it. But you guys were going to get some money. But was it, did you feel like, okay, that's fine. We get some money. I'm going to be okay for a while or what are we going to do? We were not a generation two or not equity owners. So the money went to, it was essentially for my dad. And then there wasn't, let's say, wasn't, this was not a windfall exit. And I think beyond the money, I think the biggest thing that we, at least, top of mind for us was just the loss of purpose and a loss of having work and the community that we had built. So we were cut off from that world overnight. It's like getting fired. Yes. Like getting fired. Yeah, I guess we got fired. But I think my dad being so just, you know, fierce and determined, he's like, okay, let's go. Literally the next day, we ended up going to IKEA, buying furniture, going to get cell phones and we set up makeshift offices in the basement because he was like, we're moving forward. We're not going to stalk this happened. What's next? He was literally like, we're going to start a new business right away. Well, he was just like, you guys, I think that was his vision. But he's like, you guys will still need to come here every day. And after a few weeks, I think we realized that this is at once in a lifetime opportunity where you actually get a forced blank slate. And we're like, this is a time where if you want to go our separate ways, we can go our separate ways. If you want to go start a restaurant or do whatever. So we kind of started very broad. We're like, right now, before we jump in and try to do the same thing, let's go very wide and see, okay, where do we want to go? So, so what were you, you mentioned a restaurant, for example, what were other ideas that you guys batted around? I wanted to buy an organic farm. Okay. Really rooting for that, but that got shut down. And to sell the produce from the farm? And start to, yeah, cultivate different crops or it could be, yeah, commodities actually start to grow. And not an easy business. Glad you passed on that one. What else? What are the ideas? I mean, don't think that we had some grand idea. It was like, what is coming to us and let's explore. But quickly, options started to get eliminated. We're like, because everything required risk and resources and experience, which we did not have. Whereas if we started doing the same thing, we brought with ourselves the most valuable thing, which was a decade or a decade and a half of experience. And there's no point in throwing that away. Forget about the money. The money was the least important thing we got from there. The most important thing was experience and the people we knew, the network, the reputation we had built. If we did anything else, we would sacrifice those two important assets. So we was a bit reactive until we settled down. We kind of accepted the reality. We went through the stages of grief and we're like, okay, then I think it was in January. It was in January that of 2013 that we're like, okay. Now it's time to get serious about what we want to do next. When we come back in just a moment, the photo vats make hundreds of thousands of granola bars, but have to scramble when they're accidentally stamped with the wrong date. Stay with us. I'm Guy Rowe's and you're listening to how I built this. Hey, welcome back to how I built this. I'm Guy Rowe's. So it's 2013 about a year after the photo vats had to walk away from their previous business. And they're starting to get serious about launching their next venture. for NEMA, the inspiration begins with this kid. My kids were growing up and now we were sending them to school. We were packing lunches and because what we got from schools or daycares was that hey there is a kid that has a not allergy. Please make sure you don't send anything to school that has not allergies or may contain that. So much sunflower butter in my pantry. Yes. Exactly. But I'm like it doesn't really matter to us because our kids are going to grow up ultra healthy and they're never going to even know what's in a package. That lasted I would say guy for only a couple of weeks because as they went to school they got exposed to all sorts of snacks that were not say to our standard of healthy whether it was the quaker chewy bars or different cookies and snacks that were not free but not healthy and not organic. And so this is where we're like we started to notice a tension point. There is this three dimensions of tension. There is the tension with the parent us wanting to do the best. There's the tension within society to want to be inclusive and keep everyone safe. And then ultimately the child the kid the tension of a treat something tasty. So if we could solve that tension between those three stakeholders we could have something there. Yeah. So we also elicit a marketing firm that actually went out and did research around this white space and coming back with the fact that there is actually an opportunity of having a product that is allergen free but also healthier, better ingredients organic that's the missing space. So that was something that Nima felt tangibly but then when we actually took it out into the market we also saw the void in the market as well. All right. So this is 2013, so that long ago but it was really there was a lot of focus on and had been for a while on gluten free peanut free, soy free nut free right. I mean because just an explosion of kids with with particularly peanut allergies and gluten allergies and all kinds of things. So you thought that was interesting. You saw an opportunity to kind of get into that space but also to kind of recreate the classic Quaker chewy chocolate chip granola bar. Yes. So I think there were some nuggets of insights that went beyond just making a peanut free product. One of them was the fact that we realized when we did the research that it's not just the child that eats snacks. Snacks are bought by the parents and it's a family consumption, it's not a child consumption thing and a lot of brands had launched products that were kid forward. So that was an insight for us. So we did not made good is not a kid forward brand. It's an all family and 50% of our households actually don't have kids and so there is a cross section of making it small for kids but also 100 calories so that it's portion control for the adults. The other layer of insight that we had was that the allergen fee should not be a prominent callout. It's something that it's a background. Yes we're allergen free but first and foremost we taste great. You didn't want people to think oh this is not for me. Exactly. Like you call something for diabetics. People think it's just for diabetics but it could just be a healthy low sugar, no sugar product. Exactly. And was the first product going to be granola bars? No it was bites. Our bites. Okay. Is where we knew we wanted to disrupt the category. So these little round granola chocolate chip or fruit bites basically? Yes. There's fear like a ball. Tell me about the name because the name is amazing made good. Yes. So the name funny story is that when we launched made good many people called us and said do you know that made good is grammarly incorrect that you should say made well? Which exists as a clothing brand? Yeah. Yeah. So I think the name was really important and then we went to a design firm that was not actually a food forward design firm. They were cosmetic forward design firm because we wanted a design that stood out on shelf bringing in lots of bright colors and no CPG company would say you should make half your front panel your logo made good takes a 50% of the front front panel. And so this was all designed disruption that we did to stand out on shelf. Okay. So 2013 you start to really set this up and from what I understand it sounds like it's a similar model to what you had earlier which is you're going to have your own production facility because nor because nor I should say normally but oftentimes when when people want to build a food brand and they don't have a lot of money they work with a co-manufacture because that is a more efficient way to do business. You you find a co-manufacture you give them your recipe they package it up they send you the finished product and then you distribute it you get a distribution deal and you put it in stores right and by the way this is the model as you know with many brands that we see at Whole Foods and elsewhere. You guys decide to build your own production facility that's going to cost a lot of money and imagine and you know you'd where was that money to come from. Yes that was going to cost a lot more than working with a co-packer. We knew that was what we wanted to do because that's where we bring experience it. I'm being vertically integrated helps us with our cost model but also making a claim such as allergen free. I wanted to be able to sleep at night. You had to control the entire it had to be like a pharmaceutical clean factory. Yeah and this way we can we control that full supply chain we control the manufacturing and by nature where manufacturers not marketers right so that was I think what we felt most comfortable that we could succeed in first. Okay let's talk about the factory because you're going to build a 20,000 square foot factory sounds huge is not actually right but by you know people but it is pretty significant. How did you finance that? Well the bank of parents retirement funds also we went to an actual bank and got a loan. We secured it with the homes that we had and we went and it's rare to get pre revenue loans from a bank. Yeah but because they knew us and they saw what we did before in the previous business they agreed before making a dollar in sales to give us a loan of two million dollars but yes you need you can't build 20,000 square feet of manufacturing with a hundred thousand dollars like that that just doesn't work. No. And you got to pay rent every month you have to hire employees you got to certify the plant there's just there's just a lot of things to do from zero to manufacture. And you knew right away from the beginning you guys did not want to go seek outside funding that you wanted to figure out how to do this yourself without any outside funding or partners. Yeah we didn't want to get into partnerships again. Yeah okay so you are you you secure the financing against your homes and you get your parents help you out a bit you get the money to build this factory and how long does it take before it's online before you can actually start to feed at the ingredients and make this product. I want to say it was really quick from when we got keys to the site to when we started to manufacture our first order. Yeah our first order was actually for Costco for a contract manufacturing brand and it was 300,000 bars and so it wasn't your brand it was for somebody else. No. It was it was for another brand. Okay so and they were going to go to Costco and so the contract manufacturing was going to be a part of your business that was going to enable you to fund the brand essentially. Absolutely. You knew that you had to make potentially competitors in order for you to have the capital to launch made good as brand. Yeah if you think about it we use the same model as we did at Taste of Nature private label contract manufacturing to fund the brand. So that's essentially what we knew worked and we started with that. It's interesting because that's that again that could be risky right I mean if you're making a product that is similar to the one that you want to build that can kind of cannibalize your product if if you want to start a brand I mean there's always a risk in in doing that. There is this particular order and we first started out was actually making fruit and not bars so it was distinctly separate than the brand that we ended up with undermade good but this order was yeah fruit and not bars and it was two flavors that we had to produce and it really sped everything up because we had a tight timeline I think we had to deliver within like three to four weeks we had very manual equipment we had a very small team because really we just had to get people in higher trained we needed to create processes we had to get our organic certified food safety certification, all of that happened in the in the four weeks and we had to turn around 300,000 units of bars and it was not without its heartache because three quarters into that order we realized that we made a mistake on the date code on the date code on the date code so it has a best before day. Oh, yeah, it should have been 2014, right? Because it's a year after but it was dated 2013. So we're like just about done this order with blood certain tiers and here we are we had to rework a significant amount of well you actually unpack them and and and the bars later like so we so we had to figure out what to do and we weren't going to make them again we didn't have time for that or the money or the resources so we found alcohol wipes I kid you not okay this is this is creativity at its best alcohol wipes to wipe out the date code and run the bars through the equipment again with the right best before day how many bars did you have to do that to oh my god and you might don't remember I know sapocoded and just beside herself 200,000 bars I think wow I think more than half the order had to be repurposed I don't even know how humans could do that you have to get a bunch of people and to just carefully wipe that off yeah the story here is it just looks easy but we walked through fire to get this thing up and running yeah we used to call it you dig a hole and then you figure out a way to get out of it we're like we're gonna take this order we're gonna figure out a way to make it because that's who we are we will deliver when we come back in just a moment the family business finally begins to roll out its own branded products starting with granola bites and eventually expanding to dog treats 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 late 2013 and until now the photo vats have been funding their business by contract manufacturing granola bars for Costco and at this point they haven't sold made good under its own name but early the next year they're ready to roll out their own granola snacks for the first time and the first retailer went to his law blowing Canada which is the largest grocery store in Canada and the buyer had a son who had a peanut allergy and so he's like everything that's peanut free is garbage I haven't tasted anything that tastes good that's organic and so I can see why parents would buy it I'm willing to give it a shot so they listed four items on it you know how you get in you get to the top of the shelf and the top of the shelf is not a great place to be at our eye level no but we were able to sell in because the value proposition the weight was positioned back in 2014-15 was strong enough for the retailers the not in the natural aisle not in the conventional aisle not sitting beside the conventional players but sitting in the natural aisle we were able to sell in pretty quickly then the second part was that the packaging worked really well for us because it would pop that kind of created that noticeability and picking up the shopper the consumer picking it off the shelf and then the product delivered ultimately when consumers took it home kids liked it and they came back and the repeat was there okay here here's a question because I mean it's this is where the story kind of to me becomes kind of crazy and and I say that in both a good way and a bad way because I love I love it when we have episodes where it's like okay we launched in 2014 and nobody's buying it and it's like dead and we're just not and then and it slowly grows and then it becomes this is different like you launched this thing and it really took off quickly and so I'm wondering what explains that because you didn't really have a lot of money for promotion right or for a marketing costs so because you know you really kind of you start to distribute this in 2014 and you debut this at Expo West in the US in 2015 but initially you're really just in Canada you're not going to break into the US for another year or so but how did you get I mean if it if it's carried in you know grocery stores in Canada on the top shelf how did you get people to notice it and to try it to buy it so I believe in the 100 mile radius marketing strategy so when we started we're like let's make sure we own where we are so because we can drive there if I can drive there and if my team can drive there we can merchandise store we can demo and on the with the help of my wife she did a ton of events farmers markets every weekend she was at a farmers market and today I would say our brand awareness in Toronto is incredibly high maybe 90% of the people know yeah and we built proof of concept and that you could take to the rest of the regions and we didn't have a marketing team or even a marketing manager for many years after that so and you were some of you really began to focus on procurement on sourcing of of ingredients yeah I did end-to-end supply chain so called out the same vendor partners started to build those relationships the only difference was that instead of you know buying pallets of products I would be picking up you know boxes of raisins putting it in my car like bringing it in so it was just that different scale but it was incredible how how much also that community trusted and believed in us that again not a lot of sales not a lot of proof of concept but really willing to lean in and forget about credit apps or like what do you need how can we help that really helped us to kind of get things going to make sure we have materials okay so you are by the by 2015 it sounds like you are distributed across Canada right is that fair to say yeah yeah by 2015 we're pretty much across Canada I'm curious when you take the loan out how long to pay back that bank loan how long to take I don't know if we've ever paid anything back because you just grow and you borrow more so I don't know if you ever yeah we were never out of debt where we have a much bigger debt today because we keep manufacturing is a capital-indensive intensive business so every time you double the business we essentially have to double our footprint double the output and so I guess my question is did you did you know you were not going to be profitable for a while yeah so it took us a couple of years but I think we got into profitability pretty quickly because I am a great believer in a healthy gross margin you got to build whatever one designs whether it's co-packing whether it's private label which is for a retailer or whether you're doing your own brand having a strong P&L a good knowledge of your gross margin and when you can grow into it is really important and we were as the volume came in we were able to get to break even and profitability by maybe 2015 I had to go look back but it was pretty early so all right so you are and when do you get into you into the US market and how interesting the US we get in just into the northeast a one region of whole foods the northeast region of whole food so we kind of do a little test first in 2015 with 10 stores that 10 top stores in Manhattan I hire a merchandiser I hire a demo crew and I made sure that when we're listed there we have great numbers and so we launched nationally in whole foods in 2016 I saw that by 2017 so about three a little over three years in you guys are doing about $50 million in sales so at that point I mean you had you were doing much more business than then then taste of nature had been doing when you left it's crazy that was not part of the plan another enabler for us was getting into Costco I remember I did a road show in the US and we went to see five or six regions and one of the regions the northwest said okay I like these bites are really cool but can you put these bites these pillow packs in a pouch I don't want it in the box and so when you're us when you're able to make 300,000 bars by hand like this is a piece of cake of course I can print in the pouch so I'm like yes of course I can print in the pouch and then I pick up the phone I'm called sawha and sawha and say hey we got to put these in a pouch okay there's the there's the sibling dynamic right there. So Lima says yes to opportunities. and then sat by our left figuring it out. So it took a lot. Like some of the things we said yes to, I think probably retailers went to many other suppliers first, and they said no, and they're like, "Okay, I guess Riverside or Madegood will say yes." And it was just value packs. Six flake, we had one thing called the pizza box, or it had probably 13 different products in it. I know what a nightmare it is in manufacturing to make one skew that has 13 different products in it, but we did it. It was the only way. Okay, I want to just be clear. Riverside, of course, is the parent company, Madegood is the main brand, but Riverside would also, I mean, through Riverside, you could also launch other brands, right, under that parent company. And you decided to, I don't know if it was a separate brand, or if it was under Madegood, but a new brand called Good to Go, which you launched in 2018. This was the sort of like, it was a part of the keto. I shouldn't say craze, because it never became a craze, but I think there was always this assumption. I was keto for a year, and I always assumed that this was gonna blow up. And it just hasn't, it's really hard. You gotta eat a lot of fat, a lot of protein. Tell me about this experiment. What was that idea of the script? So totally separate brand that was for people who are keto. - Yeah. And another one of the challenges with an entrepreneur, I think that I am is the shiny object syndrome. It's like, oh, there is an opportunity here. Let's run after it. We can do it. And I think one lesson that I've learned, and it took a number of these examples that we gotta be really careful on how we deploy our resources and against but but Riverside is here so that we can become one day a house of brands. And we are looking for creating that next brand that we want to house under Riverside. And that is intentional. - Got it. Okay, so the Good to Go brand didn't quite take off. I guess you just continued it not that long ago. And I mean, this was out there for, I don't know, six years or so or a little bit more. What was the kind of the signal that told you it's time to kind of sunset this product? - Well, I think we had several signals. Maybe we didn't listen to some of them. If I'm gonna be perfectly honest. - Yeah, tell me, yeah. 'Cause I think we had earlier on, we had some quality issues with the product. So we had to reformulate. The product didn't turn. I don't think we put enough marketing behind it. It wasn't growing. So the product wasn't growing. And it's an opportunity cost. Anytime you are distracted doing something you're not, we weren't focusing on they, on growing made good. Which brings me to another product that you put out cookie pal, which is for pets. I mean, to me it's really interesting. 'Cause I love just trying different things. But some other people might say, "Well, you really want to stay disciplined." Like focus on the core thing and really go deep and build out the brand and the things coming out of that. So tell me about the cookie, about the dog treats. - I didn't go to business school as you can see. I'm learning everything about the dog. I didn't tell me about the focus part. Are I skipped that? - Well, you got your pet and you love your dog and you're like, "Let's make something for the dog." Actually, he didn't have a pet at that time. - Okay, it's funny. It's interesting. But cookie pal is still alive, so that's a different kind of story. - It's a good business. Yeah, it's what we did is we separated it. So it's got its own team and it's operating independently. So it's not distracting us. - That's right. - Part of the story of cookie pal, it connects to the saying yes to customers. So at a cost-copyre out of Western Canada, she moved her desk from department 12, which was the bar to the pet side. And she called me and she said, "Nima, I see a great opportunity. "There aren't any human-grade pet treats. "If you can get me something, I will list it here for you." - Human-grade in me, in other words, some of the humans could also eat. - Yeah, so right now cookie pal, you can eat cookie pal yourself or you can give it and you can give it to your dog. - I've heard that about like other dog food that it's human-grade. You can eat this dog food. I just, I have two dogs. I love them. Even if it's human-grade, I'm just not gonna eat it. - Well, you haven't tried cookie pal yet. That's why. - I haven't. All right, so you've got that going. And I'm also just kind of curious about, some of the, just the, as you grow, right? And as you get more sort of awareness around made good products, how do you start to think about other, excuse, other things, right? You've got gorolabars and then you've got the bites and then eventually you're gonna move to like muffins and cookies and, you know, even now like snacks like not goldfish, but goldfish like puffed snacks. So tell me how you start to think about developing new products. So early on we didn't have the discipline of marketing and insights and research. So innovation was done primarily by me and my thesis was, oh, goldfish. Wouldn't it be nice if we did what we did for chewing gorolabars for goldfish, right? So that was the, - It was literally that was it. There was no like market research, no like a consulting group that came in. It was just a thought. - Yes, and then I like it. - And then I live equipment. I love machinery, I'm manufacturing guys. I'm like, oh, I go to Europe, I see this cracker line. It looks so good. I'm like, we'll buy it. - Machinery can make crackers. - Yes, because you need to machine, we have to make it, we're not cooperating it. That's the thing that makes it difficult. Like every time we have an idea, we have to build the capability from ground up. So that's how it used to be, right? Now we have much smarter, more capable people that are looking at these decisions and like who made these decisions? - Uh-huh. Right. - Cleaning up the cleaning up the business. - Right, fair mess. - How much time do you give something before you decide, or is there formulas and more just intuition? Like, or do you really now use data? I mean, let's say the, you know, the puffs, the pizza puffs or the cheddar puffs, you know, you put them out there and how long before you're like, okay, we're good. This is working. - Well, there is the emotional barometer. - Yes. - And then there's the factual data barometer. - Which is the one that matters. - Really? Okay. - Yeah, okay. - We've been going on the ladder for a while, so. So yes, we are moving from the emotional to the data barometer to make these decisions. So you heard Salma describe the reformulations that we did on the good to go product. I'm like, no, we cannot give, we gotta make it better. What can we do? Like it's just like, I'm not, I'm not letting go. But again, it's another, is it worth the fight? And is the energy that I'm putting against it? Can I deploy it against something else that has more potential? And I need to move myself or remove myself and allow others to make those calls. - Yeah. And I know that there are a couple of things that some challenges you guys had run into. There was a drought in 2023, which affected, you know, supply chain, but I want to jump into something that happened in 2024, which happens to a lot of brands. It's not uncommon. You've got product on the line. And some tiny piece of machinery breaks off at some point. And somebody discovers a little metallic piece in a product, it's a nightmare. Happened to you guys. A tiny little bristle from a brush had gone into a product. And this really, help us understand, 'cause you have to recall like two and a half million cases. Help us understand the effects of that on the business. Like what, that's like a huge hit, right? - It was such an incredible learning experience. I am, today sitting here, I'm grateful in Happened. A few things, one is nobody got hurt. And sometimes I wonder did we overreact? But that's okay, because I rather be on the safe side and recall as much product, as if there's a little bit of a chance of it not being safe, then we should just call it, right? So those are hard, that's a hard decision. It's not a cheap decision, and it could have a lasting impact on the organization. But when you put principles in place, the decision becomes really a black and white decision and just make the call. - But I think not that it was easy, But I think. Once we made that decision, it kind of was, I know for me, it was a bit of a relief as well. That, okay, we're owning this. Everybody showed up. Again, our values at play, I think it was remarkable to see how much everybody cared. Yeah. To show up, it was over Christmas. Christmas was canceled. I bet. Yeah. For most of us, no vacations. And you got a lot of press attention, which you probably didn't want at the time, around this. Absolutely. Now, there was a lot of turbulence inside the Versailles because we were scrambling. We hadn't done this before. Yeah, I think the silver lining is that our relationship with our customers is so much better. Because every time we go there, they're like, this was the best in class recall. If you want to have a recall, this is the way you do it. We call them. Call them. If you want to have a recall, call them. Let me ask you about just overall. You've built this business now. Hundreds of millions of dollars in sales a year. This is a big brand now. What's your sense? It's still privately owned. I think you guys own most of it. You did bring in some, I think, one strategic investor at a certain point, if I'm not wrong, about that, right? Correct. But privately owned. What's the game plan? What do you think? Do you think your kids are going to take over it? Do you think you're going to go public with this? Do you think that one day you're going to sell this to a bigger, like, a general mills or a unilever or whoever, Mondalees or something like that? For the last decade, we've been so focused on growing the business that we have not had the luxury to contemplate. Okay, what are we doing? Why are we here? What's going to happen? What do we want to do next? I think we're just, I'm speaking for myself, really starting to reflect on what is it? How do I bring value? What is my purpose? Why are we in this business together? And we don't get calls. Yeah, Nima gets calls all the time. I'm sure. I'm sure. A lot of suitors. Right. Who want to put in money, maybe private equity or other companies or right, who want to buy you out, right? Yes. Yes. And I'm polite. I like to listen because I say to myself, I don't know. What the future is. The way I'm trying to reframe this is that we are caretakers of this business. As long as I don't get distracted with cookie pal and good to go and stuff like that. You're getting a little bit better. I'm getting better. Keep up the good work. Yeah. Can you give a rough, I mean, it's a privately held company, so I can't verify it, but I mean, how much do you do a year roughly? We're not a billion dollar brunt. More than 100s and pretty great. Yeah, it's amazing. And it's Canada, US, in Canada, we're the number two brand. And the US, we are number six and the fastest growing brand in the category. Or, you know, we have ambition to get to number two. I didn't go to business school, but I think I am experiencing the big, the most incredible education one could ever have to be in my seat or for someone, for us to be in our seats, even for our leadership team, like everyone's here because this experience is very unique. Is your name? Yeah. So, when you think about the journey you took and where you got to today, right? And it all kind of collapsed in 2012 and then kind of re-birthed this idea, new idea. How much of where you got to now do you attribute to the work and the grind and how much you think had to do with being lucky? First to you, Anima. I am a little bit of a believer that it's more than luck. I think it's karma or universe. I don't know. It's God. It's not me. Whatever it is, it's not me, but I don't know. Luck sounds a little bit. We were blessed with this opportunity. How far it is that and then half of it is we showed up and took advantage of this opportunity that was thrown on our lap. I'm a believer that everything happens for a reason. In 2012, I didn't know what that reason was and it was scary and it was angry and there's all the emotions, but everything happens for a reason. And I think we're here today. Again, not just the three of us. Everybody else that is either here with us today, not here with us today, that helped us to get to where we are. That's Salma and Nima Fotovat, who, along with their sister, Saba, are co-founders of Made Good and its parent company Riverside Foods. 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 ideas, insights and lessons from some of the world's greatest entrepreneurs, please do send up for my newsletter at gyros.com or on Substack. This episode was produced by Catherine Cipher with Music composed by Runtina Arableui. It was edited by Niva Grant with Research Help from Chris Messini. Our audio engineer was Jimmy Keely. Our production staff also includes Casey Herman, JC Howard, Alex Chung, Carrie Thompson, Carla Estevez, Sam Paulson, John Isabella, and Elaine Coates. I'm Gyros and you've been listening to How I Built This. [Music]