How I Built This with Guy Raz - Live Episode! RXBAR: Peter Rahal

Episode Date: August 13, 2018

In 2013, Peter Rahal was obsessed with CrossFit, but noticed it didn't sell any snacks to align with its pro-paleo philosophy. So instead of joining his family's business, Rahal Foods, he recruited his friend Jared Smith to start making their own protein bar. They made the first RXBAR in a Cuisinart in Peter's parents' home in suburban Chicago. By 2016, RXBAR was doing over $36 million in sales, and in November 2017, the founders sold the company to Kellogg's for $600 million. Recorded live in Chicago. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. your place with all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca.ca. slash host. And one more quick thing before we start this episode, just a little warning that my interview with Peter Rahal has some salty language and Peter definitely drops a few, you know, F bombs. if you're listening with kids, just bear that in mind. And here it is. You got this idea. You have a

plan. Did you think, yeah, let's go raise money? So that was actually our initial plan. And I remember Jared and I was like talking about like, who are we going to raise money from? Like, I'm arresting my dad. Like, do you know any, you know, rich people I can like, you can connect me with who give us some money? And my dad was like, he's old school. It's like super traditional. And he's like, you need to shut the fuck up and sell a thousand bars. From NPR, it's how I built this, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on today's show how Peter Rahal turned egg whites, cash shoes, and dates

into a $600 million brand called RX bar. If you go to a website like Amazon and you type in energy bars and you start counting all the different types of bars that come up, and I mean brands, not flavors, brands of energy bars, you will probably lose count at around 300. And the actual number is a lot higher, maybe as many as a thousand brands. No one really knows. The point is, is that energy bars, this is a really crowded sector. But six years ago, Peter Rahal walked into that extremely crowded space and And he said, you know what the world could really use? Another energy bar. So Peter and his co-founder started RX bar in Chicago with almost no money and no experience in the field. What they did have

was an interesting idea, a way to market energy bars that few people had thought of before, kind of a side door into a very jam-packed marketplace. And that side door was making energy bars for a very niche group of fitness freaks. Now, even though they started small, you can now find RX bars in just about any major grocery chain in America. You've probably seen them. They've got those distinctive packages with the ingredients listed right on the front of the label. Three egg whites, four almonds, six cashews, et cetera, et cetera. Now, that label and that approach sent Peter Rahul's little startup into the stratosphere.

In 2017, less than five years after launching in Peter's, parents' basement, RX Bar sold to Kellogg's for $600 million. It's an incredible story. And I was super excited to hear Peter tell it when I sat down with him in front of a live audience at the Athenea M Theater in Chicago. Peter, wow. You are, I think some of your friends are here. Yes.

Yeah. Amazing. Amazing. So, Peter, tell me a little bit about your home. life as a kid. You didn't grow up too far from here about a 20 minute drive or something? Yeah, so it's about 16 miles from Chicago, so just a pretty picturesque suburb and both sides of my family are Lebanese, and I attribute a lot of my strengths and weaknesses to that DNA. Right, right? And so what did that mean? Like, did you guys eat like Lebanese food? Did you, like,

I don't know, were there like cultural things that you did growing up? Yeah, I think comfort and conflict, valuing trade and commerce. But like, I mean, around the dinner table, was there comfort and conflict? Yeah, yeah. It's just normal. I mean, you know, you get into a fight and the next thing, you know, you're nothing's wrong. Yeah. Right. It's unusual for, I think, American culture, but that's how some of our family was. Yeah. And what did your parents do? What was your business? So my father works in, he's a broker-trader agent for juice concentrate or different industrial fruit products. So they represent processors in Europe, South America, Asia, like for example, apple juice concentrate.

They'll represent the processor in China and then sell it into the United States. So a global trading brokerage. And it's called Ray Hall Foods, right? Yes. So you kind of grew up a little bit in the United States. a little bit in this world of the food industry. Oh, totally. Like, I grew up listening to my dad all at all hours talking about, you know, selling loads of apple juice and drums and all this language and jargon. And like for me, I just knew the food is all I really know. Yeah.

So he really introduced the business to the family. Like business, his business was part of his life. And so I grew up like that was like normal. What about school? Was school easy for you, or was it difficult? Yeah, school was probably the first bit of adversity I faced in my life, so I was miserable at school. I'm not meant to do anything linear. For example, I remembered specifically in like seventh grade where my friends were going to study hall,

and I was pulled out of the normal study hall. and I was put into a special study hall. Huh. And so for me, I've always just interpreted like, oh, I'm not normal or I'm slow or I'm stupid. So I kind of always punted school in formal education. Yeah. Did you, I guess your mom had you tested, right, for... Yeah.

What's wrong with him? We went through a battery of cognition tests, and it came out that you were dyslexic. Yeah. How old were you when you knew that? Well, they always knew something was, like, wrong when I just, I think I learned to read, like, way later, like, speech therapy, all this shit. Were you embarrassed by your ability at school, even in junior high and high school? Yes, for sure.

I mean, from, I would say this, like, from second grade to 22, I just thought I was, like, not successful. Because you think about today in our society, like, when you're 12 years old or 16 and even in high school and college, your performance or success is determined based on your marks in school. Sure. I mean, I was a D student. Like, and I tried. I worked really hard. Like, I was, to get D's, I, like, had to climb a hill with an airplane on my back. So it was great conditioning for me to kind of go on and survive.

And I think about some of the early days of our expert in particular, like with Jared, it was like, survived. Yeah. But you did get into the marijuana business. It's an overstatement, I think. You did sell, you started to sell marijuana to friends in high school. First of all, how did you know what to do? So as a child, I was always fascinated by cycle of life with gardening. So like, yes. I'm justifying.

But I think it's really fascinating that you can like, plant a seed, you take care of it, you put it in a good spot, you nurture it, and then it grows into, say, a tomato, and then you can harvest it. And so, and for real, as a kid, I always was into gardening. I had vegetable gardens, and then there's a curious 16 or 17-year-old, this is when pot used to have seeds in it. Apparently it doesn't have seeds in it anymore. I got, I had seeds, and I just innocently put it in my, yeah, I germinated it in.

inside with a light. And then my parents have a beautiful house and the roof is really flat. And it's one of those houses that's in the forest, a little bit on a hill. And so I just put it on the roof and, you know, and it grew beautifully. And then it came to harvesting and I'm not a good salesperson. I was trying to sell it, but no one wanted to buy it. I really just gave it to all my friends and it was just a fun process. The next year I grew it again. I grew it again. I got more sophisticated, but then the landscapers saw it and my dad had enough and took it down and then I planted it in the yard, but then they mowed it over. That was it. That was the end. All right, so it was time to go to college, right? I guess.

And you were, as you say, you were not a good student. What did you, did you have a hard time getting into college? Yeah, so my family's legacy was through Denison. And I, you, I applied and I didn't get in. So I went to school where I could get in. Right. And the whole process I just like I didn't want to, like my mom filled out my paperwork. Well, I mean, he was probably challenged. I mean, dyslexia is not a joke.

I mean, right? And it's hard to explain, but I just. Yeah, how do you, how do you explain to people and they say, well, what does it actually mean? Like, can you not read easily? Like, what does it mean? I think the best way to describe it is. any sort of sequential tasks. So tasks in a sequence is really challenging.

Paying the bills when you think about something as simple as that. Dyslexics have a really hard time following those things. But I think it's important to understand what they're good at. And so what dyslexics are good at is pattern recognition. So like facial recognition, recognizing shapes, holistic thinking,

things that are really good in strategy. Did you know that at the time when you were in college? No. You just thought, I cannot read. I can't do. my brain just doesn't work that way. Yeah, I just like, I didn't know what I was good at. Honestly, I think a lot of entry-level jobs require sequential tasks and linear thinking,

and I'm just not set up for it. And I think that's why you see a lot of entrepreneurs who are dyslexic. So you made it through, you graduated, you're done, you get your cap and gown, and what did you do? What was your first job out of college? So my father always was grooming me for working family business, and that was like my plan. Your plan was to go work at Ray Hall Foods. You'd been going there since you were in diapers.

Yep. Clearness. So what was the job that you did? So I had a bunch of internships at different fruit processing plants. And so what they do is they take, like, say, apples, and then they will press them and they turn it into, like, different products. So juice concentrate, industrial products. So that, like, juice companies like moths would buy and put into their product. And so my father was able to give me an opportunity at Mandi Foods, which was in Belgium.

And they're a red fruit processor. So red fruits are strawberries, raspberries. And I want to learn the business, right? Just learn to prepare me for the family business. And so I graduated in May. And I had one week off. And then the next Friday, I was on a plane with a suitcase to go to Belgium and move into an apartment to start Monday.

Yeah. And I remember showing up my first day of work. I showed up in a suit that was like oversized. looked like shit. And no one's wearing suits. So I didn't get the memo. And was there somebody there was like, oh, Peter, I know your dad, and come on in. Yep. I mean, right? Because your dad had been in this industry his whole life. So naturally, he wanted you to get experience. You wanted that experience. And it made sense. So they were processing like what, strawberries and raspberrys and raspberry. We did red fruits, right? Yep. Absolutely. And how long did you?

you end up staying there in Belgium? Like 13 months. And I guess there was a period like sort of four-year period after you graduated college where you did that job. And then you kind of tried different things. You went to Lebanon. And for a while, how long did you go to Lebanon for? I was there for a year. And what did you do there?

So I was a student not working for a degree. Uh-huh. And so for me, I have a great pride in my family's organization. origin and like I had to be there. Yeah. You gained a lot of empathy when you are seeing how other people live. Sure. So, so there was really valuable experiences and really shaped me as a person.

So when you came back to the U.S., did you like go to your dad and say, okay, dad, I'm ready. I've done my internship and where's my office at Ray Hall Foods? No, I came back. Well, the origin of coming back, I was like sick of being a foreigner. But I came back because I felt like I was being selfish in pursuing these self-serving things and being away from my family. And I felt my career wasn't getting anywhere. So I came back and I kind of knew I knew I needed another experience.

So I wanted to. And my dad was like, no, just go get a job somewhere else. He said go get a job. So you wanted to go work at Ray Health Foods? I think if they wanted it, I would have said yes, for sure. but if they didn't want me. Now, let's just pause here, because had you gone to work for Rahal Foods,

your life would have been totally different, and you might not be sitting here on the stage telling this story. So, but at the time, did that sting at the time? I was, well, if you look back in my history, I was used to eating shit. Because you were a bad student or eating you, right? Failing was not something foreign to me.

Huh. I've read that at that time, in retrospect, you describe yourself as an angry young man. Angry, what were you, what did that mean? I think a combination of like hunger and drive and then being lost. And I think probably honestly a sense of entitlement. You know what I mean? Like I should be going here. And I just was short-tempered and wear my emotions on my sleeve.

I was unable to self-regulate. I hadn't softened my edges a little bit. bit. Were you living with your folks with your parents at that time? Yes. So you're like 24, no job. So what did you do? What did you go work? So I worked for transportation brokerage in Chicago. Okay. And that was a great place to start. Those places hire like crazy. They're like mills, you know. Yeah. People mills. What's transportation brokerage? So if you look at like moving something from A to B, there is someone who needs something moved, and then there's like the person who's going to move it. So a middleman between the person who owns the truck and then the

shipper. How were you able to do that with dyslexia? Were you able to kind of navigate that job without having to look at spreadsheets and... No, I mean, I wasn't good at the job. I mean, I can like sell stuff sometimes. I'm easily distracted, and I think, I actually did okay, but like nine months I left. You're there for nine months, and obviously we know what you went to go start, but how did the idea for an energy bar even come about? So I think two origins of that. So one is I had a miserable job.

I needed a new job. You just had a necessity. You needed to find something that was going to get you excited about the world. Yes. So there was that drive to go solve a problem, right, or find an opportunity. I was an early adopter of CrossFit. I was introduced to it playing rugby, and I just really fell in love with it. It was painful at work to gain results. It was a great community. They advocated for like a paleolithic diet. grain free, dairy free, sugar free. Yeah. And so I started, you know, obviously being influenced by that.

And a question was like, why isn't there a good tasting, like, bar that fits that. That was missing, right? And then working out at CrossFit gyms, you start to see, like, oh, my gosh, there's these group of people that all do the same activity that prescribed to the same nutrition values. And yet, they're selling water. They're selling T-shirts. And so, like, I kind of see a retail landscape. And there was nothing like that.

I mean, there was no energy bar that fulfilled the paleo, you know, criteria? I mean, there were, no. I know there's Lara bars, but not really a protein bar. But from a protein perspective, there's one called Amrap Nutrition, but it kind of sucked. And so, so you, so okay. All right, so 2012, the wheels start to turn in your head. And, uh, when you. first approached, let's say your friends.

And you were like, yeah, I'm going to quit my job and start an energy bar company in the most, possibly the most crowded sector in the food business. If I was your friend at the time, I'd be like, dude, you don't want to do that. That's like getting into the bottled water business. Yeah. And I think a lot of people, when, you know, I'd be very excited about it or we'd talk about it. the look on their face was like, that's a dumb, dumb fucking idea. And they weren't wrong necessarily.

I mean, but no, I mean, it was. It was. No one, right? The market didn't need another protein bar, that's for sure. But you were like, no, this, I think this is going to work. Or did you just not talk about it to many people? I don't have many friends. And so there's an advantage of them.

I see. Okay. Having many friends. No, I mean, we were, I was kind of private about it. it. But we're just focused and we get some feedback, but, you know, if it's negative, you're kind of like, oh, fuck off. We're just going to do it anyway. Yeah. And did you, I guess, like pretty early on, did you decide to call your friend Jared, Jared Smith, to join you? Yeah, absolutely. You called him and you said what?

Yeah, we said, yeah, let's look, let's, you know, it's not like, there's these moments where it's like, oh, like, we're going to do it and commit. It's like a process. So it was like, let's go to the whole foods. We looked at it. You looked at the ingredients of other bars just to get a sense? Yeah. Yeah, exactly. So we just kind of like did some preliminary market research and then started learning, really. And what did Jared bring to this that you didn't have?

So one of the main advantages of being dyslexic is you know very clearly early on in your life what you're not good at. So it was like I knew I couldn't do it by myself. That you couldn't like do the spreadsheets. Oh, just any, like, I couldn't do a lot. And I knew I needed someone to really balance me out. Jared's temperament in general, like, was perfect for mine. We have an amazing rapport. I've known him since first grade. It was a natural fit. And what did you guys do? Like, what was the first thing you did? Like, you bought a bunch of ingredients and you, like, got a Vitamix and you just threw it in there and blended it up? Like, how did you start to even, you? make prototypes. So first was we went to Whole Foods

and just toured the market. On that tour, we're like, let's start playing around with ingredients. And so we always had the vision for like what the product would be like. So like a real, like, the jargony term is like a minimal ingredient fruit nut protein bar.

And the general like principle or philosophy around the product was like we, whatever part of the formula we needed, we wanted to make sure the ingredients were the best possible. So you think about like binders like honey or tapioch or syrup. Like we wanted the best binder possible. And so we went with dates. It's a fruit. It's real food. And then we think about protein. You can do soy or way or these other things. But they're not paleo. No. And from our world like

egg whites are superior protein source, the highest bioavailability. And you think about Americans in our culture like people eat eggs every day. So they're so closely associated with health and breakfast and and bodybuilding even, like, they eat crazy amount of eggs. And so that's, like, the protein side, right? And then the other side is, like, inclusions or flavor components. So, like, we wanted almonds, the king of nuts. And then we think about chocolate, like, we searched the U.S. to find a 100% chocolate. No sugar.

No sugar. No sugar. So can't eat sugar on a paleo diet. No. And so we found these, like, 100% chocolate, basically a cacao. And so that was, like, how we approached the philosophy of the product. How much money did you put into this business? To start was like $5,000 each.

So you had $10,000. And I borrowed the five from your dad. So he gave you the five. And what kind of equipment did you have, like a cuisine, art? Like I interviewed Laura Merrick and created Lara Bars, and you may have heard this episode. I mean, she just took dates and nuts and put them in her cuisine, and then rolled it out and shaped it.

And that was how she did it. How did you do it in your little, you know, kitchen? So making protein bars is pretty similar to, like, making cookies or any sort of, like, dough. So we just used a cuisine art. And the funny thing... So you used a quezon art. Yeah. Just anybody interested in starting an energy bar business, get a cuisine art.

Yeah. You're going to need it. Just like a little bowl mixer. They're really good machines. And so the funny thing is in our lab where we do all product. development today, we have the same red mixer that the first recipe was made. Oh, there's a red cuisine. Yep.

And we have, we have like four other ones that are silver, but there's this red one in our lab still. That's the original one. It's still used today. So you guys would take dates and stick them in the cuisine art, and you have cashews or actually cashews came later. We had, we used, so like, we were so obsessed with being differentiated. We want to be differentiated from Larbar, so we actually use dates and figs.

early on. Right. So that was like our original formula. So who was testing them? Were you giving it to friends and asking for feedback? Yeah. So I, so like August 2012 to March 2013, you know, we'd have like logs of this RX bar dough and I remember showing up to the cross-ed gym that I was a member of. I was a weirdo with like top-aware of this stuff. And what was the first flavor? that you made? Coconut chocolate. So you would, you actually made the bars, put them at Tupperware, and went to your CrossFit gym?

Unpacked just in Tupperware. And Jared would do the same at his, the gym he was a member of. What did you do? Do you say, may I speak to the manager? Well, I was pretty entrenched in that community, so I knew the owners, I knew everyone. I was like obsessed with working out. So, and but it was like, it wasn't just once. It was all the time.

You know, we collected tons of data of like, does this, do you like this? Do you like this? What would you like? Would you pay this? Yeah. You just ask a ton of questions. Yeah. At what point did you say, okay, we got it. We can actually start to try and sell these.

So, like, ideation was August 2012. And the first time we, like, collected revenue or made some sales was March 13th, 2013. And we moved pretty quick. So we were really small. Like, we started in my parents' basement. We didn't have much exposure. We were manufacturing ourselves. We were doing literally.

Every part of the business from filling it, website, ordering ingredients. Yeah. Like literally designing packaging, printing it, labeling it, all of it. How did it, what did it, what did the packaging look like? I actually have some. Ah. All right. It's not staged, don't worry.

For a podcast audience, I should describe this package because it could have been the same package you sold marijuana in in high school. It's just a brand. package and there's just a sticker on the front with some coffee beans, this RX bar, coffee cacao, and on the back, it says, you know, a bunch of stuff. You know, we couldn't afford a, like, proper packaging. So we designed it on PowerPoint and then we would send the... Well, there we go, PowerPoint. We would send the file to, like, Staples.

And I remember Jared going to Staples in Naperville and, like, negotiating with a guy to get better rates. We eventually developed a relationship with the guy. His name is Stephen. Here's the thing. How did you guys know that this was going to be safe, that it wouldn't go rotten, that it was going to be shelf stable?

Like, did you, was there a point where you had to hire somebody to do that? No. So the hypothesis was all these ingredients by themselves are stable alone. Okay. So you put them together, they'll be stable. Simple as that. Yeah. And like in an early stage of a business, you can't break the law,

but you kind of have to break the rules a little bit. And like, we're eating it and we're fine. But, I mean, all the ingredients are stable and food safe. So it really wasn't a concern with it. And, you know, you look at the market, what Larbar has the, like, you know, you kind of connect the dots. And how did you come up with the name RX Bar? So from the early days, the whole strategy was to make a product that is for CrossFit, that market,

and for the paleo consumer and build it online. We build a web store and sell directly to gyms. Sure. And then a byproduct of that would be like consumers coming directly to us. And we would scale that and then eventually cross the chasm and go to a co-packer and then go into more traditional retail. How was it that there was no energy bar that was directed toward the CrossFit community? How is it that no one thought about that? Well, I think a lot of people look at niches or look at a small segment, and then it's not big enough for them.

Huh. It was like a side entrance almost. It wasn't like, we'll start at Whole Foods. It was, let's just start with Crossfitters. Yeah, and we were very disciplined with it. I remember being like I rather, we rather have a CrossFit customer in California. than a local Chicago independent grocery store. Just because in the grocery store, we're among the sea of competition.

We had no awareness. The product didn't really make sense for everyone. Whereas in a cross-foot gym, we were by ourselves. It was literally engineered and designed for that occasion. So it was perfect. And so we really focused on that. And actually, back to the name, I remember sitting in Jared's apartment, which he still lives in. And I remember a funny story.

So we had to go get the domain, right? Right. And this is the guy, some, you know, Cyber Squad or had the domain. RX bar. Yeah. And he wanted 10,000 for it. That was all your money. And I was like, fuck.

And Jared's like, well, let's offer a thousand. I was like, all right, let's just do it. He offered a thousand and he gave it to us. I never really shared. Wow. I was like, we should have offered 500. Wow. Thousand bucks.

So early on did you think, and we've had, had a lot of people on the show who early on go out and seek funding. Did you, I mean, you get this idea. You have a plan. Did you think, yeah, let's go raise money? Yeah. And so that was actually our initial plan. And I remember Jared and I was like talking about like, who are we going to raise money from? Like, I remember asking my dad, like, do you know any, you know, rich people that can like, you can connect me with who'd give us some money? And my dad was like, he's old school. It's like, He's like, you need to shut the fuck up and sell a thousand bars. Coming up in just a minute, how Peter and Jared sold those first thousand bars and a whole lot more.

I'm Guy Raz, and you're listening to a live episode of How I Built This from NPR. Hey, welcome back to this live episode of How I Built This from Chicago. So it's 2012, and Peter Rahal's dad has just told him, no, I'm not going to find some rich people. to loan you money to start your energy bar company. You have to go out and prove yourselves first and sell some bars. So Peter and his partner, Jared, well, they listen. And, you know, here Jared and I are just these entitled kids who think raising money will solve our problems.

That message is really powerful because it allowed us to focus on what's important. And what was important was proving it. What was important is figuring it out. And so just, you know, instead of going to a kitchen, we, like, moved my parents' basement. Instead of going to a designer, we went to PowerPoint. Like, instead of going to a printer, we went to Staples. Yeah. Instead of going to a third-party designer, like, website, we, like, went to Shopify.

You did what you could do. Like, right? You had very limited resources. Yeah, basically. So we both quit our jobs and started hot. hustling, like, emailing, calling. And you would say, hey, we have these. Can we send you some to test out?

Well, first we would try to, like, sell. And like, hey, we're selling this. It's $2. You resell it for three. You know, if they're reluctant or unwilling, we would give it on consignment. We'd do anything. Right.

And were the, I mean, if you're cold calling a CrossFit gym, were they receptive? Did they blow you off? What was their response? So it was an interesting time in CrossFit where the idea of retail was just beginning. So a lot of CrossFit gyms were very principled and like our job is to focus on training and physical fitness, not selling goods. Right. And then some were like more open to it.

And then there was a little bit of education like, hey, you know, your customers are your training them, you're doing a great job, but they're going to buy like across the street to buy product. Don't think it about it's like capitalizing and selling out. It's actually like delivering a great good and service to your customers. And so that's where the CrossFit world really shifted and became really explosive in popularity. And you see gym members, you know, becoming good operators and starting to build a retail of front of like selling T-shirts and really developing the retail side of their business. And how, I mean, with $10,000, how were you, you know, making enough bars and then bringing enough revenue back? It's definitely at the beginning in the middle of 2013. So one of the advantages of manufacturing ourselves,

and to give you an idea, from like 8 a.m. to noon every day, Jared and I would make like three to seven batches. Which produced, how many bars? It was like 440 bars a batch. Okay. And then we had a team of girls that would pack them in the afternoon and then we would go back.

But that was our day. Just like temp hires that you would. to help you. I don't know what their status was, but. Didn't you hire your mom at some point to help you pack bars too? Yeah, so when we were first launching in my parents' basement, Mrs. Smith and Mrs. Ray Hall volunteered and, you know, putting labels on the front and back of this was the biggest pain in the ass. And it requires a lot of stanton on and actually.

My poor mother just couldn't label them correctly. And Mrs. Smith was just nailing it. And she's... Right. And I was like, Mom, you got it. You can't put the front panel twice on the package. Right. And she's like in love with it.

She's like, you know, it's a romantic idea of her son starting her basement, so she's in love with it. And then after like two or three times, I'm like, this isn't working. So you had to fire your mom. Yeah. Basically. Wow. So, yeah, so I mean, you guys are making about 440 bars or so a day. No, no, no, a batch. So we were up to 10,000 was our capacity. You could make 10,000 in how long?

A shift, so eight hours. You could make 10,000 bars and just the two of you? And like some, yeah, like 12 other people. Wait, who are the 12 other people? You would hire, like, people to help you make them? Yes. And did you no longer were working in in your parent's basement? You went to work at like a professional kitchen, a place you could like rent out?

No, it was a place called Ellison Flavors, which is a repacker of juice concentrate that used to be a customer of my father's. So we just got a thousand square feet there and then started operating. It was food safe. It was a great place. Month and you would make the product there. Yep. Make it, ship it, sell it, work out of it. It was actually like a really proud moment to like move out of your home.

And like it was like this is real. So the advantages to manufacturing and doing it small batch is you keep your inventory really low. Yeah. And so that's where your cash ultimately lays. And so we didn't really need to raise a lot of money because we made 100 bars and then went online and sold it. When you think about selling it online, you're collecting that cash. But how did people know about it online? Just word of mouth?

Yeah, it was word of mouth and, you know, we had a really clear early adopter. Like, we didn't have these ambitions of, like, going national or, like, we were, we were solving a problem for CrossFit. CrossFit or CrossFit? Like, we wanted to serve them. Because when you're done with CrossFit, you want quick protein. Oh, yeah, it's perfect. And it's convenient. It's right there.

Or in the morning, if you want to, like, do a workout, have a protein jig and then grab a bar to go for later. Like, it was a perfect fit. So that's how the awareness was really, like, organic in that community. And, like, it was a, we talk about, like, product marketing. fit. It just fit really well, and that's where a lot of the organic word and mouth traction came from. Within nine months of launching this company, you guys did $600,000 in sales. Yeah, so April 2013 to end of year, we did 600. It's unbelievable, right? It's a clear sign of like real traction early on. There's just a lot of demand for what we were making. So we knew it was special. We

didn't realize how special ultimately become. So by the time you hit $600,000 in revenue in year one, that all that money is coming back into the business. You're using that to buy more supplies. And were you able to keep up with demand? No. So how long was the wait time if like, were there CrossFit gyms that had to wait like weeks or months?

So like our capacity was based around our mixer and our people. So like we couldn't send an email. for example, or like promote too much because it would stimulate demand and then we wouldn't be able to fulfill it, which was actually a good constraint. It was healthy. We didn't grow too fast.

And most important thing is we had great empathy for the whole business. I guess production, demand became so intense that by the middle of 2014, you just hired an outside manufacturer to make it. You guys decided or concluded you could not make this yourselves anymore.

Yeah. And so the whole plan was to manufacture ourselves, scale it to a point, and then commercialize. So find a good partner to... And the partner was here in Illinois? No, originally it was upstate New York. And good to go, right? No, it was quite a disaster.

Right. I'm sure you... So, like, manufacturing food's really hard. So I went to go overseas production. Jared is at home base, making sure we're filling orders. You were going to New York, upstate New York? Yeah, to oversee production. We were there for a week.

week and, you know, this is like my baby. And so I'm like a lunatic, like, walking around, making sure the bars are made right and like, sure, overseeing everything. And, um, so we come back home and I'm like, Jared, this is, they're not the right partner for us. You just didn't feel it when you were there. Yeah. I mean, their leadership. Like, I, for example, I was posted up in an office for four days. Next to me was the president. And we were the only customer there, he didn't even acknowledge my presence. He just hid in his office. And so if you think about what that says about the company and the leadership there.

So it just wasn't a good vibe. And two weeks later after that production run, Jared gets an email from the president who I never even shook his hand who was next to me. And what do you say? Just basically like Peter's not allowed at the plan anymore. He was disrespectful to our employees. your pricing is going to go from 16 cents or like whatever double so jerry and i are like fuck yeah everybody talked about retains so our product like we never did shelf life studies we were just

too busy like playing offense i guess and there was some stability issues with it and why was that well we only learned because you know we used to make batch to sale and so the first time when we we commercialized we made like a hundred plus thousand bars Okay. And so here we are sitting all this inventory and selling it through. And then basically we had customers saying like, hey, it's tasting funny or whatever. And so we had shelf life issues on some of our product. Yeah.

And so, you know, I think one of the things we did that I'm really proud of is we took an insurance claim on all that inventory. I think most brands. You mean you just got rid of it? You dumped it? Because it was not up to your standards. No. Okay. And like in reflection, most brands, I'm pretty confident it would have sold through it.

And it was a really dark period. How much was that inventory worth at retail? $300,000, $400,000. And I think about this. So in May we did like $500,000 in sales. Yeah. By the end of that like process, because we were out of stock for two to three months.

While we were, like, found a new partner. Then by like August, we did $120,000 a month. By the end of that year, $2 million in revenue. Yeah, I know, exactly. Like even despite not being. being able to sell stuff. Still primarily CrossFit gyms and people buying online through word of mouth. Yes.

I remember first seeing these in 2016 in Trader Joe's. And I go off and on paleo, sometimes easier, sometimes harder. But I was in the paleo phase. And I saw them and I was like, oh my God, I can eat this. How did you get into Trader Joe's? Yeah, so Trader Joe's is a huge milestone for us. because you think about it for the first time when someone asked the company

like where can I buy in RX bar for the first time our answer wasn't like where do you live? Yeah. So it was really amazing to have that like whole footprint. How did they even, did you get in touch with them? Did you pitch them? Did they come to you? So it was at a trade show.

They expressed some interests and then our... Like a buyer? I'd come by your booth. Yep. Like a product scavenger. And did you guys have a big booth? very expensive. No, a shitty 10 by 10. That was under resource probably. And you just had like a tablecloth and just piles of our X bars. Yep. So you get, and how long does it take you between the trade show and the time that these bars are in Trader Joe? Is it a long? So it was like January to June. And was that an instant game changer for you guys? Yeah. Yeah. It was kind of like,

all right, we're in the big leagues now. Because like Trader Joe, it's a hard place to get into. You think about it, like, if you go to that set, it's only, like, the top brands. They don't carry local or little ones. Like, that was like, oh, shit, this is a really working moment. And then our performance there just continued to grow. That year, 2016, you did $36 million in revenue. And our aggressive forecast was, like, 16 to 18. Aggressive.

But, I mean, did you even have time to sit back with Jared and say, Whoa. This is crazy. No, I think we were just too focused on what's next and like growing it. I think in reflection now we always think about the fond memories, but in the moment we were, we were just a grind. Yeah, we just keep going and keep going. So there was just a huge bombshell announcement in I think November of 2017. Kellogg's buys the company outright, $600 million.

This is a company that was started in 2013 in your parents' kitchen, in your basement. Yeah. Yeah. The number, you know, we never dreamed of any sort of outcome like that. I think that number reflects, like Kellogg didn't just buy a brand. That valuation, whichever one looks at, is really, it's way more than just the bar. I mean, we have a ton under the hood. We have really special people.

And so if you're a great company, you're going to get great value. Yeah. So you are now a Kellogg's employee. Yeah. You are the CEO of the company, as you've always been. And you are 32? Yes. You've got all of this money.

Is it weird? I mean, does it even process it? Does it change anything practically? Does it change anything about the way you live your life or how you feel about it? No, it doesn't change me. I mean, I still dress like shit and have the same. shitty shoes that people make fun of me. Like, and the only thing

that changes is, like, where you sleep and how you do opportunities, to where you can travel. And I think the biggest thing is just freedom, like, financial freedom. You don't have to worry about like providing for your future. And that's, I think that's a burden that is really hard. And so I think, you know, I mean, Jared still lives in his 400 square foot apartment. Think about that.

Oh, my God. God bless you, Jared. You know, yeah. Do you think that you're going to give away most of it over the course of your life? Probably, some capacity for sure. Like, I want to do good. I think it's a responsibility to, I think it's a responsibility to society. Like, I've had some success, and I think you owe it back in some way. So you've heard the podcast before.

I know some folks in the audience have. I always ask one question at the very end, which is how much of what happened to you? Do you attribute to your skill, your hard work, your intelligence, how much to luck? You know, I think I'm very lucky to be born in the United States. I think I'm very lucky to have the family. And, you know, if I didn't have my father and mother to raise me the way I did,

I would be drunk at a bar miserable. You know what I mean? Like, so I'm very lucky for those things. I'm very lucky that I met Jared and had a humble partner to do this with. I'm very lucky to be dyslexic and the attributes and strengths and weaknesses with that. I'm very lucky this is the golden age of entrepreneurship and food.

So I think a lot of it is luck, but talent has to play a variable in it. But it doesn't happen without good timing and luck. Peter A. Hall, founder of RX Bar, thank you so much. Thank you. Thank you, everyone. I spoke to Peter at the Athanam Theater in Chicago, and Peter sat down with me even though it was kind of a crazy time for him. I spoke to him just a few days before he was set to get married.

And he told me that by Lebanese standards, the wedding was a pretty intimate affair, just 150 or so guests. And no, the menu was not paleo. Peter and his wife served lots of fatouche salad, hummus, and mountains of pita bread. Hey, thanks so much for listening to this live episode of how I built this from Chicago. Our show is produced by Ramtin Arablui, who also composed the music. Our live team in Chicago was Ellie Prescott and El Manion. Thanks also to Neva Grant, San Azmeshkampur, Jeff Rogers, and Benjamin Clempe. Our intern is J.C. Howard. I'm Guy Raz, and you've been listening to

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