How I Built This with Guy Raz - Stacy's Pita Chips: Stacy Madison (2019)

Episode Date: August 9, 2021

In the 1990's, Stacy Madison and her boyfriend Mark Andrus were selling pita sandwiches from a converted hot dog cart in Boston. They decided to bake the leftover pita into chips, adding a dash of parmesan or cinnamon-sugar. At first they handed them out for free, but soon discovered that people were happy to pay for them. So they eventually decided to leave the sandwich cart behind and launch Stacy's Pita Chips. They hoped the brand might grow into a modest regional business—but it kept growing. Roughly ten years after the launch, Stacy's sold to PepsiCo for $250 million. 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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Hey, it's Guy here, and I just want to mention that for the month of August, the entire team at how I built this is taking a much-deserved summer break. But don't worry, we're going to still be bringing you fresh content every single week this month. Every Thursday, we're going to post, one of my conversations from the How I Built This Virtual Summit, which I hosted back in May. Last Thursday, we had a bonus episode about marketing from Gary V.

And this week, look out for my conversation with the incomparable Brene Brown. She'll offer some of the best insights on leadership and vulnerability that, honestly, I've ever heard. Anyway, on today's show, you're going to hear from an entrepreneur who turned day-old pita bread into an irresistible snack. This episode first ran in 2019, and I hope you enjoy it. When I got that $60,000 loan, within six months, I went back and asked them for $500. And they said, here, sure, here's $500,000. No, they said no. Well, they didn't say no.

They said, no, not without equity. And we were like, equity, equity in what? We've got nothing. 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 the show today, how Stacey Madison turned day-old pita bread into a new snack, Stacey's pita chips, and then went on to sell her brand to one of the world's biggest food companies for a quarter of a billion dollars.

So there are some startup stories where most of us are probably thinking, I couldn't do that. Like Squarespace. If you heard that episode, you'll remember that Anthony Cossalina was and is a gifted computer programmer. He had a highly specialized skill. Same story with Steve Madden. He literally designed and then fashioned shoes from leather and sold them. But then there are the stories where most of us can actually imagine doing that thing ourselves. Like Brian Scudamore, who bought an old truck and offered to hollow. away people's trash. That's how he started 1-800 got junk. Or Lisa Price, who tinkered with homemade lotions in her kitchen. She went on to sell her brand, Carol's daughter, to L'Oreal. Well, today's story is of the second variety, the kind of story that almost anyone can relate to because it is such a simple and elegant idea. You take pita bread, you cut it into wedges, you bake it, throw some parmesan or seasoning on it, and voila. You've got Stacey's Peter

chips. Now, even though the snack food industry today is a $66 billion juggernaut, Stacey Madison did not have a grand master plan to disrupt snack foods in the late 1990s. At that time, she and her boyfriend were literally selling pita-wrapped sandwiches from a sandwich cart in downtown Boston. The pita chips were an afterthought, a way to use up those extra pitas at the end of the day. Pita chips were never supposed to make Stacey rich, but eventually, Frito Le would come knocking with a fistful of dollars. But long before that, long before Stacey even sold her first sandwich, she was on an entirely different path. She grew up in the suburbs near Boston, and after college, Stacy went out to California to get a master's degree in social work. She thought about becoming a psychologist,

like her dad, but he wasn't so enthusiastic about that. He felt I should always be become a social worker, rather than go on to get my PhD and be a psychologist, he was like, oh, that's no profession for a woman. That's one thing that he said was smile and look pretty and you will find a husband. You know, I don't want to make him sound like a jerk. No, not at all. He was like a caring, loving man that put his family first, but he was also a product of the 50s. Sure. So once you get your master's degree, I read that you actually moved to Washington, D.C. to do what? To do social work? Yes. I worked in a group home for homeless, pregnant, drug addicted women. And I have to tell you, I mean, I loved the job. It was very rewarding. But at the time, I think I made $22,000 a year. And it was really paycheck to paycheck. check and very hard to survive on that kind of an income. So I decided to go and get licensed and be

able to private practice, which eventually I did go on to do, but I found it very isolating. You know, now I've got to go and I unlock the door and I do marriage counseling and then my evening is over. I've seen five or six patients and I close the door behind me and I go home. And I put a lot of effort into getting those degrees and licenses and realized that ultimately it probably just was not for me. So you're, I guess, roughly 30 years old at this time. And by the way, you were engaged to a guy named Rick, right? No, that ended. I think it was just mutual.

I think ultimately it was just not the right thing. We just both agreed. We had had the place picked out that we were going to get married. And it was kind of a bizarre story, but I went and I had a massage. I know it sounds like I'm going off on a tangent here, but it'll come back. I went and I had a massage. And the woman told me to take off all my jewelry and blah, blah, blah, blah, blah. And I took it off.

I put it in the dish, got my massage. And I got up and I went to get dressed. And I was like, oh my God, all my jewelry is gone, including my ring, my engagement ring. And I was just, you know, it was from his family. It was like, I was just so upset. And the girl was gone. She had gone gone, like never to return. I think she took off to Florida or somewhere.

She never came back to work. She just kind of took all my stuff. But with Rick and I, it was kind of like the ring wasn't replaced immediately. even, and I don't care about the ring, even if it's just a cigar brand or something like that, that it kind of took so long replacing the ring that it forced both of us to look at, should we really be doing this? Maybe this was a sign or something. And ultimately, yeah, we just decided maybe we shouldn't get married. So you, so you guys split up. Meantime, there was this guy, Mark Andrus, who you had met through your brother a few. years before he was a friend, did you guys start dating or would you just kind of keep in touch? So he was still a friend and I talked to him all the time about my disengagement and all of that. He was super supportive and eventually our friendship led to dating and he was getting his PhD.

So he was doing an internship in Hawaii and said, well, why don't you come out to Hawaii? And what did you do in Hawaii? So Hawaii was an amazing experience. We lived in just this tiny box, and there was no kitchen or anything, and there was no bedroom. There was basically a cot, and we bought an electric walk, and we used to cook in the walk. We'd wash it in the bathtub, and eventually we found a roommate, and she had a nicer apartment, and we worked out a deal where we would take her second bedroom, and in exchange for a lower rent, we would cook for her.

And while I was out there, I worked at a restaurant, and I got a job as an assistant manager, and the restaurant was going to open up a surf theme, you know, another location, a surf theme restaurant. And they said, do you want to be part of that opening? And I said, yeah, that's great. And we had this big opening with, you know, all the surfers, the local surfers in Hawaii and even retired surfers. They came.

And the owners of the restaurant were like, if we could pull this off, you know, you guys are going to get a big bonus and blah, blah, blah. And we did. I mean, we were, money was coming in left and right. And to the point that we had to stuff it in beer boxes and bring the cash down to the basement. because they couldn't fit it all in the register. It was just crazy. So successful opening of the restaurant. A couple of weeks later, I sat down with my general manager and said,

how about the bonuses they were talking about, you know, when they're coming. And he's like, well, let me meet with the owners and get back to you. Wait another couple of weeks, sat down with them again. And he said, well, I spoke to the owners, and they've decided that we need to let you go. And I was devastated. I never lost a job in my life. And then I remember speaking to my aunt who was in the restaurant business and she's saying, are you kidding me?

Don't be so naive. They always hire people to get restaurants open and then they let them go. And ultimately, I circled back and said, well, if I can work this hard for someone else, then why can't I do it for myself? And it's kind of funny because at that point, Mark was still in his internship, and we were in these high-rise buildings in downtown Honolulu, and we were cooking meals for our roommate anyway. And we figured, well, why not just put a sign in the bottom of the building? And when people got home, they could, well, it was at the time of fax machines, they could fax over an order. and we would just have their dinner ready.

Wait, you would, you and Mark, because Mark was a trained psychologist, right? I mean, that's what his work was. Yeah, but you guys were also just like pretty good home cooks? Yeah, we loved cooking. I mean, Mark was a total foodie, and we marketed to our building and the surrounding buildings that if anybody else wanted us to cook them dinner, that we would do that too. We called it condo cuisine. And what were you offering?

Was it just like tonight's dinner is? Or you could order from a menu of things. Oh, no, it was just more of a, you know, you had a choice between two or three items. You know, we had seared tuna with pineapple salsa and things like that. Needless to say, we were cooking in our apartment and got very quickly shut down. Some guy, you know, called or knocked on the door and was like, you can't do this. So basically the health department was like, you don't have a license to do this. So that didn't last long.

Yeah, it was the health department that was like, yeah, you are not doing this. If you want to do this, you have to get into a commercial kitchen and you have to, et cetera, et cetera. So that dream died. And how long, by the way, did it last before you were shut down? A couple months, three or four months. I mean, that clearly, like that experience kind of set into motion, this idea that maybe we could do some kind of business. Yes, definitely. And it kind of picked me back up onto my feet after losing that other job.

And Mark, even though he's getting his doctorate at this point, he always wanted to be a chef. He came from a family of doctors, and it was kind of just, that's what you're going to be. But it also meant that he was setting aside his dream of becoming a chef. So it was a really crazy decision. but we decided when we got back to Massachusetts, we would try something in the food business. Wow. So, okay, Mark has a PhD in clinical psychology. You are a social worker by training. You always knew that you were going to go back to Boston because that's where both of you guys were, I guess, from. Yeah, New England.

And he was going to become a psychologist, but I guess your plan was, hey, before you do that, let's just kind of test out this food business. business idea for a short time. Yeah. Going into this, I mean, you got to also keep in mind the reality of the fact that he's got $100,000 in student loans. I don't have a penny to my name. Right. So you moved back to Boston, 1996. What did you guys decide to do? So we decided to buy a food cart because we couldn't afford anything else. I think it was $5,000. And I worked with my sister who she, owned a catering company in downtown Boston.

She was a huge help. And I laid out the menu and she would look at the menu and tell me, you know, you have too many items on here. You're going to have too big of an inventory. You have to streamline this. You have to, like she kind of always gave us that reality check on what went that business sense. And at the same time, because now we learned you have to be in a facility. So all of our menu we prepped and made out of her catering place in Boston. So what kind of food were you making?

I mean, this is like I'm imagining like a hot dog push cart with like, you know, a water bin that's hot and warm and like another bin to keep buns like steaming hot. Was that what the food cart looked like? Oh my God, yes. The food cart, yes, was a cart with, that was a hot dog cart. And we used to go out at night after the bars closed, and we did the sausage scene. We were cooking up, and we were just trying to get money any way that we could so that we could revamp the cart. And once we collected enough money, then we put the cart into a shop, and, you know, I designed it, you know, made it pretty front and a beautiful green awning. And we hollowed the whole thing out and made it almost into a deliote.

counter. And we served healthy sandwiches, rolled in pita bread off of the food cart, and then we made everything to order. So these were like, I mean, wraps kind of became a big thing in the 2000s. This is the late 90s. And I remember this, like pita bread sandwiches started to just like pop up all over the place. Yeah. But just to clarify that, it was basically a chicken Caesar rolled in a piece of pita bread. There were very few options. But we, but we. We made, you know, ours were, you know, we had goat cheese. We had turkey and Havardi, and we had more upscale choices. So we prepared, we sliced all the meat, we put everything in a giant cooler, and then we went to downtown Boston. We would literally roll the cart up the street and put it on the

corner of Johnson's Summer Street, and we'd get an ice delivery to the corner. we'd throw the ice in the bottom, and then we'd put out all of the ingredients, and then we'd roll it up in the pita bread, and then we had this big white piece of paper, and we'd roll the sandwich in the white piece of paper, and we'd twist the bottom. So people were walking around. It was almost like they had this big white club, and so it was really good because they'd walk away, and other people would say, oh, that looks good. What'd you get that? Yeah. And what was the name of the, did you have a name for the push card? Stacey's Delights. Stacey's Delights. D-A-P-A-S. D-L-I-T-E-S. So it wasn't even D-L-I-T-E-S. It was delights. That is so 90s. I love that.

Yeah. How did it do? Was it a hit? Did you guys get customers, like lots of customers right away? Yes, it was a hit. Huh. But we were not the only food cart down there. You have to remember that, you know, up to, you know, 50 yards away is the pretzel cart. And then there's the burrito guy. And then there's, you know, so it was at a time when in the food cart. world. I mean, now a food cart is more hip and trendy and it's a food truck now. More inviting. It's more of a food truck. But at the time, a food cart had the connotation of dirty and disgusting. Yeah. But the way that the cart was designed and that it was presented and that it looked and we had fresh tomatoes, you know, a mountain of them out front. And it was, it broke the traditional mold of what is a food cart. Yeah, yeah. And every day we ordered

fresh bread. Where would you get the bread from? Just a local baker. And it would always overorder the bread because you can run out of alfalfa sprouts. You can run out of tomatoes. And it's not going to be a big deal. But in this business, if you run out of bread, you're closed. Yeah. So I think I see where this is going. So you've all this extra bread and you're thinking, what do we do with this extra bread?

Yeah. And we didn't want to use it the second day because it's not as pliable to roll the pita sandwiches. Sure. So when we got back to the kitchen, we would cut them up and bake them into different flavor chips. And the idea was that you would do what with the pita chips? You would give them away. You would sell them. Like, initially, what were you going to do with them?

So initially, it was just a way to retain our customer base and to keep people happy as they were waiting in line. Ah, because it was a long wait. You had every pita sandwich made to order. Yes, and people would, you know, we hired a college student. She was a cashier. but in between she'd go up and down with a basket of pita chips and just give them for free to people standing in line while they waited and people loved it because it was kind of like a happy hour. And we gave them away for free, but people started saying that they did want to buy them. So initially we would just put some in a little baggy with a little ribbon and keep a basket of them out on the food cart as well.

And you could buy it for like 50 cents or a dollar or something. Yeah, a buck with the sandwich. And just out of curiosity, like, did you guys experiment with a baking? Because peanut bread can, like, burn pretty quickly and it can get, right? Like, I have to assume that you had to experiment with, like, the right temperature and the right flavors and stuff like that. That came later. Initially, we just baked the cinnamon sugar and the parmesan garlic. Everybody thinks Simply Naked was our first flavor.

It wasn't. It was the Parmesan and. the cinnamon sugar, we were baking them in a four rack oven. I mean, literally four or maybe eight trays, sorry, it's eight rack oven. So we could spread out the pita chips on a tray and we could bake eight of them at a time. And, you know, really, we were making toast. Yeah, you were making thin slices of toast. Really good toast. Yeah, really good toast. And it wasn't until later, as the company started growing, that there was a huge, jump between I'm going to make toast in my oven and I'm going to manufacture.

And keeping in mind, I mean, Mark's deferring his loans and deferring his loans. And that adds up. Yeah, he's not, at this point, he's like full on in the food business. And you are too. He's not using his PhD in clinical psychology. Right. You know, I was a clinical social worker. He's got his PhD in psychology. And we're on a street corner selling sandwiches. And so at that point, you know, we are all in. We are going to do something, and we could not put our tail between our legs and go running home. When we come back, has Stacey and Mark make a full pivot to pita chips and shake off the warnings of an industry expert who says they will never grow their business. Stay with us.

I'm Guy Raz, and you're listening to How I Built This from NPR. Hey, welcome back to How I Built This from NPR. So it's the late 1990s, and Stacey and Mark have created kind of a side hustle out of a side hustle, selling pita chips from the little sandwich cart they started in Boston. And at a certain point, the chips are doing so well that they decide to make more of them. They're using an oven that can only make eight racks of them at a time. But then they find a way to scale up. We met a very nice woman when we were doing the food cart who sold pretzels.

It was Boston Pretzel Bakery And she said Oh, I have a 40 rack oven Why don't you come try to make them over there? So we went over to Boston Pretzel And we mixed up the PETA chips And we were able to make a rack of 40 of them at a time Instead of eight trays, we could make 40 trays

And she had backup racks So while 40 were in the oven We could load up another 40 trays and 40 came out and 40 went in. And we were like, okay, well, this kind of makes more sense. What I'm trying to understand is, like, at what point running this cart did you and Mark say, you know what, actually the business we really should focus on is the pita chips and not the pita sandwiches? So I think the coming about of that whole thing was the struggle of getting inside location.

And, you know, come winter, it's really rough being out there. in the cold. Yeah. And we started working with a realtor, and the realtor kind of laughed at us and said, if you want a tiny little indoor location near where you are, because we want to keep our following of people, you and your food cart can stand online behind Oban Pan, Dunkin' Donuts. At the time Starbucks was coming into the world, you know, everybody wants those little spaces, and we realized we had to make a choice.

and we decided to go for the pita chips because in the winter I was working on the pita chips and the bag and the design and the licensing and all that I needed to do in order to get that off the ground. So with the pita chips, we could get bigger, faster. Yeah. And I took a bag, you know, we had put them in almost like a coffee bag, like with a little window. Oh, yeah. plus a little plastic bag inside of the paper bag. So a lot of labor went into it. But you know what?

I took the bag and I walked into Bread and Circus in downtown Boston. And I said, hi, I'm Stacey. These are my chips. And I'd love for you to give them a try. Wait, you just walked into a bread and circus, which eventually was bought by Whole Foods. And you asked, did you ask for the manager? Yep. Yeah, okay.

And what did the manager say? He said, wow, these are good. Huh? Yeah. love to get them. And now we have one store. There was like six or eight of these bread and circus stores. And he showed them to corporate. And there was nothing in them. They were all natural. And it was the time of the beginning of the natural food revolution. And that's just what we were innately doing. And obviously, you guys, presumably you chose the name Stacey's Pita Chips,

just because that's what it was called Stacey's Delight when you were a food card. right? We chose it because we thought that a female name on a snack food brand would sell more than a male name. Yeah, the woman in the kitchen kind of thing is much I hate to say that that's really, that was the thought behind it, was that it sounded better than Mark's. Let's just pause for a moment and talk about money because even though you were getting some stores, you know, willing to pick up the chips and to sell them, I, I, I, I can't imagine your business could operate entirely on like the sale of pita chips. How did you have money to run this thing?

Yeah. I mean, we had a lot of debt between the two of us. We ran up our credit cards. We applied for it. So I started working with the Neighborhood Development Center and they helped me write a business plan. I really networked with everybody. I could possibly draw information from. So there was a neighborhood center.

There was, I think, Jewish vocational services was in downtown Boston. And there was this one girl that used to eat at the cart. And she said to me, how do you know if you have enough bread? And she'd ask these weird questions. And one day I said, why are you asking me these weird questions? She said, well, I teach a business plan boot camp. and I use your cart as an example all the time. Wow.

And I said, really? I'm like, can I take that class? She's like, yeah, you want to take you? Come on over. And I went and I took an eight-week business plan boot camp. So between all of these agencies that I kind of worked with, because remember, I didn't have a business degree. I didn't know what a business plan was.

Yeah. So after that eight weeks, I realized that I realized that I, didn't just need $25,000 for the packaging machine, but I also needed $20,000 to buy bags to run on the machine. And then I needed $20,000 for this thing that people kept calling working capital. So that was all new to me. So where I thought I only needed $25,000. You needed $60. I needed $60. Yeah. Right. How did you get $60,000? So the Neighborhood Development Center in Jamaica Plain helped me spruce up my business. plan a little bit and put me in touch with a bank that they used that worked with the SBA.

So we had to put down 20% of the 60,000. And that's where our family kicked in. You needed to put up 12,000 bucks in collateral, basically. Yeah. And that was a $60,000 loan from a small business administration backed bank in Boston. So you got $60,000, which gave you you how much runway? How long could you, could you function off $60,000? Because you're talking about needing to buy a machine to seal the bags, to buy the bags, and then you're not left with a whole lot. $60,000 was not going to go very far because, yes, we bought the machine, we bought the bags. But the one thing that we did have, we had customers, both the consumer and the retailers that loved our chips and kept reordering. And when I, I

got that $60,000 loan, within six months, I went back and asked them for $500. Wow. And they said, here, here's, sure, here's $500,000. No, no, they said no. Well, they didn't say no. They said, no, not without equity. And we were like, equity, equity in what? We've got nothing. Yeah. I mean, this company's not worth anything at this point. So they said no to 500, and over a couple of months we were able to scale it back, and they did say yes to 350. Wow. So you got a $350,000 loan from the bank. Yeah. But how did you get the word out about the pita chips? I get it that you were kind of pounding the pavement and you were asking for managers at local markets and asking to talk with them.

But how did people find out about the chips? It was entirely word of mouth. I mean, this is pre-internet, pre-social media, pre, I mean, you didn't have ad dollars. We would go everywhere we could to sample. So we would go into the store and we would set up a table and we would just give away chips for free just like we did on the cart. And people would try them and they would buy them. And that's how we built our customer base. We had three words, sample, sample, sample.

Did you at this point have a vision for how big this could be? Were you and Mark saying, because I have to assume you were still doing a lot of the legwork. You were still maybe even baking the chips or maybe hiring people to help you. But did you think this is going to be huge? It's going to be a national brand. Was that your ambition at this point or not quite? Our goal was to be a regional brand, more like Cape Cod potato chips. and we were going to keep things manageable and in the Northeast.

But what happened was with the growth of the natural food industry, there were these pockets like Colorado and Atlanta and California. And there were these little pockets where the natural food business was really booming. And the whole creation of whole foods and them buying up all of these smaller stores, we were in all those smaller stores. So we were in the Bread and Circus and Wild Harvest, and then they all became Whole Foods, which grew tremendously.

So our initial plan to be a small regional brand, we had to rethink that. And I think that, you know, one of the things that Mark and I were really good at was, you know, not being so locked in to a straight, path that we were able to see when other opportunities came along. So, for example, the pita chips over the food cart, or, you know, rather than selling to small gourmet food stores, we're going to go into the natural food. You know, we're like, well, we could sell to these 10 stores,

or this one chain has 100. But the business was still you and Mark, right? You were the only permanent employees at this point? So it was Mark and I for the first two years. And then my brother, who at this point, had his PhD also, and we said to him, you want to sell some chips? And, you know, and ha, ha, ha, ha. We were all joking around about it. And then he came back, like, a couple weeks later and said, you know what, if I don't try

this now, he's married, they don't have kids. If I don't try this now, when am I going to try it again? He's like, sure. Because his wife, she was an accountant, she had a steady income. So, you know, he said, you can just pay me minimum wage and then we'll give it a try. And after the first of the year, you can just kind of start paying me back as we start generating a little bit of money. And that's what really, really important is that in the beginning we surrounded ourselves with believers. I mean, here you've got two psychologists and a social worker running a pita chip business, right?

Like, how implausible is that? Like, nobody would say, I want to start my business. I need two psychologists and a social worker. But somehow, like, you guys all brought these skill sets to this thing. I was street smart, and those guys were both street smart and book smart. So we all work together on trying to figure out how we're. we're going to do this. And I'll tell you, at one point, we had paid $1,500, and we flew a consultant up from Frito. He was a retired Frito guy, and he walked into how we were running things. And he was just

like, these are very good, and they taste good, but this cannot be done. This is a home-baked-type product and it's fine, but you won't be able to scale this business. Wait, why did he say that? Were you literally like hand-cutting the pita bread? Yeah, Mark's right bicep was like three times the size of his left because he was literally using a knifed cut bread. Wow. So when this guy walked in and he saw, you know, we're cut, hand-cutting bread and we're

hand-bagging everything. and each batch took a certain amount of time, and then we have to, like, you know, scrape off the trays and clean everything. And he was just like, yeah, you'll never be able to bring this product to market on any kind of scale. So for us, that was a really hard blow. I bet. But we also still found it hard to believe. Like, if we can take 40 racks, you know, 40.

trays of pita chips, and we can make that. Why can't we just line up a whole bunch of these ovens and be able to make so many racks at a time? And then what that led to was us realizing we needed a conveyorized oven. You needed a conveyor belt oven where you could just throw the pita on there and it would just go through the conveyor belt and then come out the end and just into a big barrel and the pita chips were made. Yeah, in the end game, we end. We end ended up having to purchase a custom-built oven. It was the size of a 52-foot, like an 18-wheel or truck. Wow.

But you were still, I mean, or Mark was still hand-slicing the PETA into the right shapes. You can't scale that. Like one or two or ten people can't do that. So how did you solve that problem? You're right on target here. So we broke it down into each stage of making a PETA chip. and that piece of it, what we did was we would go and we would tour other factories. So we went down to Cape Cod Potato Chips, and we went on that tour that everybody in Cape Cod goes on that tour.

Oh, you just went as tourists? We went as tourists, and we looked through that window, and we saw they were cutting potatoes with this machine, and we asked them, well, how does that machine cut the potatoes? And they gave us the name of the machine, and then we went out and we contacted that company and said, this is what we're trying to do. And we had this guy who worked for us who could tinker with anything. And so what we ended up buying was a machine that used to cut carrots for Campbell's Soup. So you know how they cut those tiny little squares?

Sure. Well, what he did is he took those blades and spaced them further apart. And when he first spaced these blades and all of us are kind of gathered around the opposite end of the machine, holding a bucket where these attempted chips are going to come out. And so he feeds the bread into the machine. He starts tossing, you know, a piece of bread, a piece of bread, a piece of bread. And we're standing out at the other end and we're like, holy shit, lo and behold, beat a chip. It's a chip, you know.

And that was the very last day that Mark ever cut a piece of bread. You and Mark eventually got married, right? You were business partners and then you got married because you were together, right? Yes. We had been together for a long time. And eventually we just got married in 97. And all was good. Yep.

All right. 1999, you get your production method down. You get the machines you need. Your revenue is growing. I have to imagine that there are big chip companies looking at you guys, even though you're this tiny little New England. based pita chip company and thinking, huh, PETA chips, that's the new craze. Let's make pita chips and crush these guys.

Not really because, so at this point in time in the company, as we just started to grow, it was also during the time of the no-carb phase. It was all those no-carb, low-carb diets. Oh, yeah. And we were like, here we are. Once again, we're making toast. And we thought, oh, my God, that's going to put us out of business. Like all these things along the way, you think, oh, my God, that's going to put us out of business.

Oh, my God, that's going to put us out of business. But ultimately, people loved the chips. It was something people ate all the time, and it was becoming a staple in their cabinet. It wasn't just a one-time purchase. Yeah. All right. So you guys are kind of operating under the radar, but growing steadily. Do you remember the first year you actually turned a profit, like a significant profit?

Was it in 1999 or in 2000? People say it takes three years. I would say it takes five. Right. So it took some time. Yeah. But I guess you guys hit a million dollars in revenue around 2001, which sounds super impressive.

Did that mean that you guys were all making lots of money? No. We really paid ourselves very little. And if anything, we really weren't making anything because everything went back into, you know, if we needed another oven. Well, you know, you don't buy this, you don't do that, you don't do this because you need another oven. Yeah. All right.

So you guys, by 2001, you're starting to become more sort of stable in the production process. But just about, I think about five years after the two of you get married, you and Mark divorce. You decide to get a divorce that year. Yeah. But then you stay honest as 50-50 business partners. This is not normally how the story unfold. Like normally, this is very messy and traumatic and difficult. I mean, it doesn't sound like that's what happened.

Yeah. Like, I'm not going to say we didn't argue. I mean, certainly we argued over a lot of things. I mean, there's a lot of tension. And the employees had to put up with us like, blah, la, la, la, like, parted with each other. And you know what? And they'd go, like, oh, boy, there they go. And they'd turn around and they leave the room.

And, you know, and then eventually everybody would come back to their desk. and that's okay. But we had a common goal. And I would have to say, I think he'd probably agree, that during the time that we were married, for the most part, it was a successful marriage. But we also had a successful divorce. It was clean and it was clear.

And we shared the company like it was our child. And everything that we did was in the best interest of the company. So we went to court together and we went before the judge and we said we want to get a divorce and we're splitting this 50-50 and we really had no assets. Yeah. Everything we had was the company and we agreed. We built this together and we were splitting the company and we were both going to stay on. And the judge was like, wow, this was the easiest one I think I'm in front of me. It is, I think it's surprising, at least for me and I think probably for a lot of people listening just because it seems to me that it takes a

remarkably clear-headed people to come to this agreement to say, hey, you know, like, we're not going to be romantic partners anymore, but we're really good business partners. And we've got this good thing going. And let's keep it going. Now, when I hear that, I'm thinking, of course you would say that. That makes total sense. Right. But most people don't say that.

So the greatest gift that Mark gave me during this period was his honesty. Because at one point he said, I don't know when or if I want to have children. Yeah. And I was in my mid-30s already. So, you know, he said that to me. And it was really, I mean, it was that night that I left, I went to the factory. I had, you know, I brought my dog to the factory all that's. time. So I really, I went to the factory and I slept in the dog bed that night. But, you know, now that I

look back on it, I mean, really, could you imagine if we would have stayed together and we might have ended up having a kid that he wasn't really into having kids? And that could have been that road that so many people go down and it ends up being a mess. Yeah. But I did decide to start a family and he was very supportive of that. I think this is like two years later, right, 2003, you gave birth to your twins. Yep, I was 39 years old. I gave birth to my twins. I mean, I went to Boston IVF, and that's how I had the kids, and I have always spoken openly about that, that I was financially and emotionally ready to start a family, and I just needed a little help. Yeah. So at this point, when your girls were born in 2003, was Stacey's Peter Chia?

was the trajectory, like, was it clear that it was going to be a much bigger brand? Or did it still feel like it was a, you know, more successful regional brand? So at this point, the company was growing like crazy. It was successful enough that we could each be taking a decent salary. We couldn't pull that much out of the business. But, you know, it was enough so that we could each, you know, buy a car and, you know, we could each buy our own place or whatever. So it was successful enough to do that, but we really, we decided how much are we going to pay each other?

And then everything else just stayed in the business. And were companies coming to you guys at this point and saying, hey, we want Stacey's Pita chips in our stores? Yeah. So I think it was when we got into the club accounts, like Costco and Sam's Club and all of So we started manufacturing for them, and then we got into Trader Joe's, and it was the perfect demographic for us. And Trader Joe's was an amazing company to do business with. They paid on time or early. Wow.

And because of that, we were able to not take on equity. Wow. And at that point, you know, everything just went back into the business. but we were just about to give up a piece of the company. And we never ended up actually doing that because we got Trader Joe's and they were ordering by the truckload. And when we were selling, when we say truckloads, I mean, it is really amazing when trucks are lined up. We're selling a, you know, a $2 item. We're not selling computers, you know.

So, you know, when we get to the point that we're doing, you know, $30, $40, $50 million in sales, Those are $2 sales or $1 sales that are going. So there's like just truckloads of chips going out the door. And at this point we had moved to the Sealy Mattress Factory where we bought the building. And it was two or three hundred thousand square feet, something like that. It was basically four acres inside. Wow. And we converted the Sealy mattress factory into a giant PETA chip factory.

I think it's like by 2005, 2006, you're selling like more than $50 million worth of pita chips a year, which is... 65, I think. 65, thank you. Pepsi announces that they were acquiring Stacey's. How did that happen? Did they approach you like a year before? Did they say, hey, we're really interested in buying your company? Is that what happened?

Or were you looking to sell it? So a couple of months before we saw them at a trade show and they were like, oh, this is a good product. And in order for them to even look at you, you have to be at least 50 million in sales and blah, blah, blah. And we were nowhere near there at the time. And that was the only contact we ever had with them. Then, you know, a year later at the trade show, again, there was this one month window where we got phone calls from three of the biggest food company. companies in the world. And we were like, we better start looking at this. And at this time, I had two little kids, you know, they're two years old, a single mom. So we really said, you know what, we should, we should, where we never considered selling. Yeah, we should maybe think about this. Yeah. So you decide to sell. And then I read that in the middle of working on that deal. There's actually a fire in the factory. Yeah, there was a big, big fire. And we had already signed the SPA, the stock purchase agreement. We had already signed that, but it hadn't closed.

We agreed on a price and all of this. And then we had a fire. There was $9 million in damages, and 25% of the factory was burnt down. Wow. And that's a really hard phone call. When they call you, you don't know what they're going to say. And basically the way that it ended up, working out is, you know, we still ultimately had a brand that was worth value. And we were like, we will get it back up and running. And the way we did it was we built a wall across half of the plant. So we were still able to manufacture on the side that wasn't burnt down. And then the other side, we called in every person over the last decade that had helped us with anything. And then people were working electricians. They brought in like the one guy turned into six guys and

overnight, round the clock. We were supposed to close in December. And by January 12th, they inspected the plant and they said, we don't believe it. They're back up and running. Place looks great. Good to go. Send them the check. Exactly. Send them the check. Which it would have been nice to see a check, but nowadays it's a transfer. So we all sat in front of the computer just looking, like, waiting for the number to change. Is it there? Is it there? Is it there? Is it there? And then it was like, you know, the money transferred in. And we did obviously close the deal.

I've asked, you know, other entrepreneurs about the sale of their business and they're different answers. I asked the co-founders of Reddit why they agreed to sell their company at the time they did. And the answer was because it was more money than I had ever had in my life. I didn't grow up with a lot of money and it was life-changing money, which I think is a fair answer. I have to assume that was a factor, if not the factor in your decision. It was life-changing money. But it had also become, you know, where we loved this business and we loved running it. At a point, the tables turn and the business starts to run you.

So I think it was the perfect timing. Yeah, I was working crazy hours. I was lucky if I got home on time before my kids went to sleep. So for me, it was the right time. For Mark, I think it was the right time. He was burnt out. That being said, after it sold, there is this major, like, this was my whole life. this and my kids and what am I going to do now.

So what did you do? I mean, how long did you stay with Stacey's after you sold to Pepsi? One very disastrous year. What was disastrous about it? It was so hard. I was contracted to stay, but I really only had to work 20 days a year. But I didn't know what else to do, so I would really go in every day. and I think I was more in the way

and I thought that I was going to be like a buffer between the new leadership team and the employees and I think I probably just created more confusion so it was eight months of, yeah, I probably just was in the way. Yeah. I can imagine, like you don't sound like a person who is different from the person who you were in high school or college. Of course, we all change and we grow and evolve. But like, you sound like a very down-to-earth person. But all of a sudden, you were, you had this wealth that I have to assume you weren't, you had no experience with. How did it change the way you live your life or anything else?

I think it, even today, sometimes when I go to do something, you think twice, oh, can I do that? Oh, can I buy that? You know, and initially, I went out and I bought a castle, right? I was like, I'm going to buy a big house in a beautiful neighborhood and get a sports car and do all of that. And I did. But then I realized my kids can't ride their bike and they go on the bus and there's only five kids on the bus because everybody else is going to private school. And I was like, we're going. done. We're done with this house. I put the house on the market and I bought a smaller house in a neighborhood where our neighbors are right next door and you could, you know, borrow a can

opener and the kids can ride their bike. And, you know, that's how I wanted to raise my family. I'm just curious. I mean, you were young. You were in your early 40s having accomplished this incredible thing, like growing this business and the whole rest of your life ahead of you. I mean, a huge part of that incredible, exciting. Like, I, you know, I think lots of people listening would say I would love to have that. But at the same time, you had to figure out, I guess, what you were going to do with the rest of your life, right? Right. People are, people look at you like you can do anything.

But at the same time, you look at yourself and you're like, well, now. what am I going to do with my life? Of course, I'm a mom and I'm parenting, and that's first and foremost. But what else am I? Yeah. And it's a very hard position, it's very hard place to be. And in the past four or five years, I've had some big medical challenges. I had breast cancer, I had an autoimmune disease, I had a full knee replacement. So I was really kind of knocked down for, four years. And when you're in that position, you really feel like the money at that point doesn't matter. You know, if there's a day where you think you may die, all of a sudden there's this mortality. And you have to think of your kids. It's the most awful thing to think about

what's going to happen with my children. Who's going to to give them a hug. Who's going to, you know, take care of them? Obviously, you know, I mean, I've got family that would step in and take care of them, but, but it's the little things. It's the day-to-day things that you mentally go through. That makes it really hard. How's your, how's your health now? Now I'm good. That's great. I had double mastectomies. Yeah. I don't identify myself as a cancer survivor. I just look at it as, this was a shit-ass time in my life, and now it's over. And, you know, all of that, you know, getting past the medical issues, selling the company, all of that adds up to taking control. And that's my sense of

bold. So you kind of got it, now you got your mind in a new space. Amazing. Stacey, when you think about the trajectory of your life and your career and the incredible success you had. Do you think that it's because of the skills that you brought and the hard work that you brought, or do you think that luck played a bigger role in that? You know, a lot of people say, oh, she got lucky. That really pisses me off. Because, you know, yeah, maybe the stars aligned and maybe the timing was right for a lot of things. But each and every one of the, you know, each and every one of the, the challenges and the hurdles that you overcome, others might not have gotten there. And we did. I could have very easily followed the path that my father laid out for me. I probably could have

just stayed in that comfort zone. But, you know, yes, by moving to this place and moving to that place and taking on additional challenges, I think you developed the skill, somewhat of a survival skill. That's what got us to where we were in 2007 when we sold. Yeah, maybe there was some luck in there, but there was a lot of skill that's involved in crossing that finish line. That's Stacey Madison, co-founder of Stacey's Pita Chips. By the way, Stacy is still in the food business. A few years ago, a lot of... Along with her brother Dave, she launched a new energy snack called Be Bold Bars. But she hasn't forgotten her first obsession, and she still gets excited when she sees somebody buying a bag of her pita chips.

There was a time I was in the grocery store and this woman picked up two or three bags and she put them in her cart. And I just couldn't resist. I'm like, you know what? I'm just going to go tell her. And I did. I went up and I said, those are my chips. And she looks at me and she goes, no, they're not. They're my chips.

I was like, oh, my God. Thanks so much for listening to the show this week. If you are not yet a subscriber, please do subscribe or follow wherever you get your podcasts. If you want to write to us, our email address is hibt at npr.org. To find us on Twitter, it's at How I Built This or at Guy Raz. And on Instagram, it's at How I Built This NPR or at guy.org. This episode was produced by J.C. Howard with music composed by Ramtin Ereble. who is edited by Neva Grant with research help from Candice Lemm.

Our production staff includes Casey Herman, Rachel Falkner, James Delahousie, Julia Carney, Elaine Coates, Farah Safari, Liz Metzger, and Annalise Ober. Our intern is Harrison B.J. Choi, and Jeff Rogers is our executive producer. I'm Guy Raz, and you've been listening to How I Built This. This is NPR.