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

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2:47You can imagine the confusion when you are studying to become a lawyer and then I move to Colorado and I'm waiting tables and I'm like, yeah, I'm getting closer to going back to school. You know, I'm in a college town now and everyone's. Yeah. So then I come home and I'm like, hey, I've got something I want to show you guys. I'm really excited about it.

3:18And they're like, oh, you know, is this a college application? Are you going back to school? And I'm like, and I take the lid off the shoebox and I'm like, I want to make peanut butter.

3:35Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

3:46I'm Guy Raz and on the show today, how Justin Gold used his home food processor to make a better tasting peanut butter and turned Justin's nut butter into a category defining brand. There's a strange thing that happens when you build something successful, and you'll hear this from a lot of founders. The chase, it never really ends. You get your first customer and then you want a hundred.

4:16You hit a million in sales, then you go for 10 million. The more you grow, the more complicated it gets. And the bar just keeps kind of moving. All of this was definitely true for Justin Gold. Justin started with a simple idea. He wanted to make a peanut butter that was better than the stuff sitting on the supermarket shelves. And at first, he just wanted to sell a few jars around Boulder, Colorado, where he lived. At the time, he was waiting tables and working at the local REI.

4:47And he thought, hey, this could bring in a few more bucks. But every time he sold a jar of peanut butter, every time a customer reacted, it opened the door to a bigger ambition. So eventually, he pitched his local Whole Foods, and then more Whole Foods, and then grocery chains across the country. And along the way, Justin kept experimenting. What started with a food processor in his kitchen became a business built around flavored nut butters. Flavors like maple and honey and cinnamon.

5:18But there was a problem. A typical jar of peanut butter in someone's pantry lasts a long time, especially if you're not making PB&J for kids on a daily basis. So after some early success, sales of Justin's nut butters started to stagnate. And that was a problem because, well, what do you do when you hit a wall that seems immovable? Well, in Justin's case, he climbed over that wall with an idea he got while working at REI and going for long bike rides.

5:49An innovation that would help propel Justin's nut butters into a huge nationally known product. A brand that would come to be worth hundreds of millions of dollars. Justin Gold grew up in western Pennsylvania. His dad was a dentist, and his mom's family owned a natural food store in the area. In college, Justin studied to become a lawyer. But instead of going to law school, he decided to go in the opposite direction. You know, I was vegetarian. I had long hair.

6:19I really felt like I was a hippie. And so the goal at that point was to move as far away as I could. And I went to the Bay Area. And I lived in Point Reyes. And I lived there for about a year. And then I met, like, you know, some real, like, living up the land hippies. And I realized I'm actually quite square. And maybe I'm not a hippie, but, you know, what am I? Where are my people? Where do I belong? And so after a year of waiting tables and working in NorCal, I decided that I wanted to give the mountains a try.

6:51But I wanted to go to a university town. I wanted to find a town near the mountains that had a university. And at that time, it was like, all right, well, I had a friend who went to the University of Boulder, and he loved it. And so I just started there totally on a whim and just moved out here and started to wait tables in Boulder. And that would have been in 2001. So you're, all right, so you're in Boulder, you're waiting tables. But in the back of your mind, it sounds like the idea was you would maybe go back to school, there's the University of Colorado there, maybe get a degree in something.

7:25Was that kind of in the back of your head? Honestly, like, for the first year that I'm here, I just want to make friends, fit in, and I want to learn where the good mountain biking spots, you know, the good ski areas, and just get settled. And in the back of my mind is, okay, there's a university here, and I would like to go back to school at some point. All right, you were waiting tables, but you were also doing the things that people do in Boulder, right? Like biking and hiking and skiing and all those things.

7:57Tell me about your diet. You're a vegetarian, so for protein, you were eating beans, nuts, stuff like that? Yeah, a lot of salads, beans, nuts, a lot of tofu, tempeh, you know, textured protein, chicken nuggets, and things were coming out. And so, you know, Boca burgers and veggie burgers. Yeah. And when it came to things like peanut butter or nuts, I mean, was that a big part of your diet? Yeah, I'd say growing up, you know, peanut butter and jelly was the first thing I learned to make.

8:31Like, you know, peanut butter and banana is to this day one of my favorite sandwiches, and it was cheap. I guess one of the things you notice is that the options for peanut butter are limited, right? This is like 2002, 2001, and there are like basically two options, crunchy or smooth, and that's it. And that struck you as unusual? Yeah. What's interesting is if you walk into a natural food store, you were going to a co-op or you were going to a specialty store,

9:06and even like at the regular grocery food stores, it was smoother, crunchy, and they'd have all the oil at the top of the jar. And then you could also just grind your own, right? They used to have these grinders in the store, and you would just take an empty container, put it under it, and you would wait 30 seconds and watch it grind. Some stores still have it, yeah. Oh, yeah, they're great. They're great. And then what was what really got me curious is you'd walk the aisle, and there was a small little peanut butter and nut butter section,

9:36and there was a preserves, jams, and jellies section that was three times the size of the nut butter section. And it was just shocking to me. There's all this variety in all of these different preserves, but not with nut butters. And so then I have a sweet tooth, and so I would go home, and I would make a peanut butter and jelly, and sometimes, guy, I'd run out of bread, and I would just take the jelly and the peanut butter and mix it in a little bowl together

10:07and just eat it with a spoon, right? Yeah. Sounds pretty good. So now you're eating this sweetened peanut butter with jelly, right? And you're like, wow, this is really good. Like, now you're using honey, and you're like, this is really good with honey. Why isn't anybody just selling it, you know, peanut butter and honey? That seems pretty simple. And then, you know, and so then you just start thinking, can you not make peanut butter and honey? Does it not work together? And so then that's when I started to get curious and started to kind of, like, create formulations and recipes.

10:43In your apartment? Yeah, I was living in an apartment with three other roommates. Okay, so you're living in an apartment with three other roommates. And what, you start to make, just, like, make your own peanut butter? So at that point, you're like, okay, if you can grind it in a store, how hard can it be to make it? Right. So you're like, I bet a food processor can make peanut butter. So then I would go to the co-op, and I would buy, you know, five pounds of dry roasted peanuts and five pounds of dry roasted almonds, and then I'd bring them back to the apartment,

11:15and I would use the food processor, and you would literally, you'd turn the food processor on, it grinds everything up, and then you stop it, you take a spatula, you push down the sides, mix it up a little bit, turn it back on, do that three or four times, and you have peanut butter in, like, you know, under a minute. And so then I would take the peanut butter, and I would add honey to it. Then, you know, once I add the honey, and then you put it in a jar, and it's warm, and it's freshly made, it's perfect. It's perfect. Yeah.

11:45But then, you know, if you wait three or four hours or overnight, it gets kind of mealy, and it doesn't hold up well. And after a day or two, I'd realize, oh, well, that's why they don't have all these different flavors, because in a few days, the texture's off, and it doesn't taste good. Right. And then just, you start thinking, okay, well, it's probably the water activity, and the oil, oil and water don't mix. What if I used less honey? What if I used something that had, you know, very little water, if no water?

12:17And then you start to run these experiments, you know, an example is banana, right? So that's kind of the holy grail for me. Right. There's banana chips. There's freeze-dried banana. There's dried banana. There's banana flavor, banana syrup. So then you start, like, experimenting with different types of banana. And before you know it, like, you know, okay, so should this be 10% banana, 5% banana, 20% banana? And so all of those two ingredients, peanut butter and banana, can turn into, like, 10

12:50jars. Yeah. And all these jars are numbered. And I would keep a journal. And the journal would have the number, and it would have the percent of peanut butter and the percent of, you know, other ingredients, including salt. So I'm like, okay, well, if I find one I really like, I want to make sure I can replicate it. And so I'd have all these jars. They'd all be numbered. I'd put some in the cupboard. I'd put some in the fridge. I'd want to understand how temperature impacted the product. And I tried a lot of different things at that time. Yeah, it's interesting. I mean, you are, you're experimenting with the chemistry, right?

13:22And the interactions between ingredients is sort of like ice cream. Like, if you put too much water in ice cream, you get crystals, right? Which is why a lot of ice creams use, like, liquid sugar or tapioca syrup, because the water content is lower. And so it's not like now where you can literally go on Amazon now and buy powdered anything. You know, you can get powdered spinach and whatever you want. But I'm thinking 2001, like, that's not so easy to get. Yeah. I mean, I would buy freeze-dried strawberries, and then I would grind them in a food processor

13:54and turn it into a dust. Yeah. And, you know, or I would, you know, buy cinnamon, and I would make a cinnamon peanut butter, you know, because it was a powder. And so, so very quickly, I had 30 or 40 different jars. And again, like, so let's just say you wanted to make honey peanut butter. Really, it sounds simple. Three ingredients. Right. Peanuts, honey, and salt. Right. All right. Well, what type of peanuts do I want to use? Because at the store here, there's Valencia peanuts, there's Virginia peanuts, there's Spanish

14:27peanuts. Right. There's runner peanuts. And then do I want a light roast or a dark roast? And some peanuts have skins on them, and some don't. What happens if I make peanut butter with the skin on it? Right. And so now one ingredient turns into like eight different, you know, roads, you know. And so all of a sudden, three ingredients turns into a lot of trial and error. So I'm curious. I mean, you're like 24, 25 at the time. You're living with roommates in Boulder. You're waiting tables, and you're doing this process. And just by the way, how long, roughly, were you kind of doing this experiment?

15:00Like a few months? Probably about four to six months, yeah. Got it. But it sounds like it was a real, like you got really into it. Were you doing it in part in the back of your mind, thinking, if I can crack this, I might be able to, you know, sell these? Yeah, I was. And I was working at a restaurant, so I'd bring samples in for the chefs and for the wait staff, and I'd be like, do you like this? Do you think it tastes good? And it was so silly, because I'd be like, this is 10% honey, and this is 15% honey.

15:30Like, which one do you like better? And it's like, you know, who cares? Like, but I cared. Like, I was really curious. Yeah. So you did this for like six months, kind of just experimenting, until you got to the point where you were like, okay, I think I want to turn this into a business. What then did you do? Like, did you write a business plan? Did you save your money from tips? Like, what were all the steps you started to take to go to the next step, which is like,

16:00okay, this is going to be a business? Yeah. So the first thing that I knew I had to do was write a business plan. And I don't know why I thought that maybe I was talking to some friends, and they said, you know, a business plan is probably what you need. And so, and so where I really got lucky is being in a college town. So I went to CU's business schools library, and I wasn't intimidated to go to the library because I, you know, because I wasn't a student there. In fact, I felt like a student because I was the same age as a lot of these, a lot of the

16:31kids there. And what was really fascinating is at the time, the library had an encyclopedia of business plans, literally from A to Z. And so I started to write a business plan. That took probably almost a year. But that's when, as I'm writing the business plan, that's when something unlocked that really gave me a competitive advantage. Which was? Boulder. Boulder, Colorado. I mean, here's what's crazy. So I'm writing the business plan, but the hardest part was, you know, what type of business

17:07entity do I want to be? I want to be an S-corp, a C-corp, an LLC. Where do you get a UPC? And how do you find an FDA food licensed kitchen facility? Like, where do you order jars from? Like, those are all things you can't just learn in a library. And so what I decided to do was, well, I'm going to figure out if there are any companies that are from Boulder, Colorado, and just ask them. And this is where things went bonkers for me is there are a lot of food companies 20

17:37years ago, 30 years ago, that were national companies that were out of Boulder, Colorado. Yeah, Celestial Seasonings and Silk Soy Milk and Horizon. I mean, there's a lot of Izzy Soda, Bobo's, which we'll talk about later, but that's, I mean, a lot of brands. But that's not where I started, you know, because I didn't have permission, I felt like, to go right to Celestial. So instead, I found a tiny salsa company that had glass jars and had labels and was in,

18:08had to use a jar filler and had to put it in there somehow. So I contacted salsa companies because that was the most like product. And I started to form these, these relationships and they were all like in this community and they were all really helpful. Everybody wanted to be helpful. And it was called, and did you call it Justin's Nut Butters or did you have a name for it yet? No, when I first started, it was Paragon Peanut Butter. Okay. And, and, and Paragon, so I wanted something that was really catchy. And so Paragon, I liked, I started calling it Paragon Nut Butter, Paragon Naturals, Paragon

18:43Peanut Butter. And my friends, they didn't know what Paragon meant and they couldn't remember it. So they just started calling it Justin's. I'm curious when you were writing the business plan, what did it say? And again, you were writing the business plan for you or for the idea of, of bringing this to people who might, who might give you some money? A little bit of both. I was writing it for me, but I knew that at the end of the day, the business plan is what I would use to try to find angel capital. Right.

19:14So the idea was, okay, let's say that this company is either going to go public, get big enough where it'll go public or it's going to get acquired. And so here's an estimate on your, your return on invested capital could be, and I had to write it in that perspective. Otherwise nobody would want to invest because there's no end game to get their, get their money back. I'm curious. I mean, this is like 2003 when you're working on this, you didn't go to business school. You didn't have a business background. How did you come to the conclusion that you needed to write a business, like an ambitious

19:47business plan with an exit and with, you know, multiple returns and et cetera. Like who, was there somebody who kind of guided you or gave you advice? God, great questions. So I got help from everywhere. So. Cause you were not, you were probably a little naive, right? When you started. Oh, big time. Big time. Yeah. So, so here I am at the library. It's, it's a summer and it's the weekend, right? And a librarian comes up and it's like, oh, Hey, what, what are you working on? What class is this for? I see you here every day.

20:18And I'm like, oh, I'm not, I'm not a student here. I'm doing this for fun. I want to start a company. And you say that and the librarian's like, wow, that's really cool. You know, have you talked to any of the business professors here? And I'm like, I don't know anybody here. She's like, would you like to meet one or two? And so then now, you know, I got to meet Frank Moyes, who is one of the business school professors. And I got to, I'm like, Hey Frank, could you like go through my business plan and, you know, and give me input and tear it to shreds. And so I had people like him who would give me advice on my business plan.

20:51And I would meet with other founders of small companies and, you know, and I'd be like, Hey, how do you scale a company? How do you grow it? Like, well, it's going to cost a lot of money and you got to go out there and find angels. I'm like, well, how did you find an angel? Well, you got to meet with this person. So then I met with someone who was an angel investor and I'm like, Hey, what are the things that you need to see? And being naive gave me an opportunity to ask really silly questions. And I met with almost every small company that I could get my hands on.

21:21And not only did Boulder have the natural food companies, but they had a natural food retailer here called Wild Oats and they were number two to Whole Foods. And we have natural grocers called Vitamin Cottage. And so I was able to learn all of these things in a condensed amount of time and fast track the whole process. All right. So you get enough data to write the plan. You've got a plan. And what's your goal?

21:52How much money were you looking to raise? I wrote the business plan for friends and family. The idea was $35,000 was going to buy me a grinder, buy some raw materials and some labels and then rent kitchen time and have built enough inventory then to get started at a farmer's market. So I would basically take my business plan and I'd have a shoebox of jars that I would make with a food processor of different flavors. And I probably had about five that I wanted to launch with.

22:22And so I would go back to Western Pennsylvania and visit with my family. And you can imagine the, what's the right word here? It wasn't disappointment. It was confusion. When you are studying to become a lawyer and then you move to California, and I had a fantastic Jewish grandmother, Gladys Gold, who when I went to university, I was on work study and financial aid and I had all this debt that I was going to have to repay.

22:54And then when I graduated, her gift was she financed my college, which was incredible, but she was a real stickler on education and making sure I got a good career. And so, you know, I move out West, move to Colorado and I'm waiting tables and everyone's and I'm like, yeah, I'm getting closer to going back to school. You know, I'm in a college town now and everyone's. So then I come home and I'm like, Hey, I've, I've got something I want to show you guys. I'm really excited about it. And they're like, Oh, you know, is this a college application? Are you going back to school?

23:25And I'm like, and I take the lid off the shoe box and I'm like, I want to make peanut butter. Here's a plan that I wrote. And, you know, and literally the first thing people say is peanut butter is fine. It's been like this for a long time. It doesn't need to change. Like, why do you think you're going to make it any different? Right. And some people thought it was really cool. And so anyway, so then I went to my friends and went to my family. My first investors were my uncle, my mom and dad and my sister. And then I was able to kind of, you know, get some inheritance that, you know, was being

23:58saved for me by, you know, my grandma. So I was able to get $35,000 together and that's how I got started. All right. So you, so you've got about $30,000 from different sources, but you're still waiting tables, right? I mean, that's, you need to like make money and you're getting tips. And what, so with that, how are you going to start this thing? I mean, you, you've got a food processor at home, but you know, from your research that you've got to go to like a commercial kitchen that's USDA certified. So you can actually sell this stuff.

24:28So I'm imagining the first step is like, find a place where you can make this. Yeah. So this, this took forever. So the first thing I had to do was I had to find a industrial sized grinder and I found out there's two types of grinders. There's a stone mill that has two grinding plates that come together and the peanuts come through the grinding plates and the tolerance of the plate is what creates the butter. And then there's a food processor, which is basically an impeller that pushes product through this circular cutting head.

25:01Yeah. It's called an Urschel. They make soy milk, they make ketchup, all kinds of stuff. So right away, I'm like, okay, I need this Urschel. New ones cost $75,000. And I'm like, okay, well, I can't get that. So I, I found the local Urschel representative, uh, Ted Dietz and Ted, like, it's like, look, I'm, I really shouldn't be doing this, but I got an old one that's 40 years old. I'm taken out of an old factory cause they're buying a new one. I'll sell it to you at a really cheap deal.

25:32And, and so what was the price he sold it to you for? $3,250. Okay. So it was a great deal. And can I just ask a point of clarification? I mean, couldn't you just buy one of those peanut butter machines you see in a natural food store? Like I go to my local Oliver's in Sonoma County and you can put your jar under there and make peanut butter. Is that just too slow? So I talked to a few stores about them and, um, they break down a lot. Okay. And, and so I, and then, then you talk to other peanut butter companies.

26:06Cause I mean, the first thing I did guy is before I even looked at buying equipment, I contacted a few peanut butter companies. Yeah. And I asked them, Hey, you know, do you guys make peanut butter for other companies? They're like, yeah, we do stores. We do other companies. And I'm like, that's great. Could you make it for me? And they're like, yeah, of course. Send us your recipes. And then we got to the, where the rubber hit the road, which is the MOQ, you know, what's the minimum order quantity? Yeah. And it would be in the hundreds of thousands, you know, of units just to turn the equipment on.

26:36And they're like, look, kid, we can't help you, but I tell you what, here's what you need to do. Like, and that's how I found out the type of equipment they were using. And I'm like, okay, I want the equipment that these big guys are using, but you guys, you know, that's what they use. And that's, and someday, you know, I want to make a hundred thousand units at a production run, you know? And so that was the goal was to, how do I get started? So eventually I can hand this over to somebody else. I always had that in my mind.

27:05When we come back in just a moment, Justin begins to share his peanut butter with more people and learns when to listen to their feedback and when to ignore it. Stay with us. I'm Guy Raz and you're listening to How I Built This.

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30:41Hey, welcome back to How I Built This. I'm Guy Raz. So, it's 2003, and Justin has finally gotten his hands on an Urschel, an industrial-strength grinding machine for making large quantities of peanut butter. It's literally, this Urschel is like a jet engine, right? Yeah. And on one end, you put in a peanut, and it literally, you turn on, and you put peanuts in it, and it literally pulverizes them. And the other end comes out this peanut butter goo, and it kind of drips out.

31:14Right. And I'd have to collect it into a bin, into a stainless steel bowl. Yep. And then from that stainless steel bowl, I'd have to add my ingredients. Which is cinnamon. Cinnamon or honey. Powdered honey. Right. I was using liquid honey at the time, but it was a small enough percent that it still worked. All right. I literally had to go to a restaurant supply store, and I bought a stainless steel, like, soup paddle mixer, and I would make maybe 50 pounds, 40 pounds at a time, you know, which

31:49is, you know, 40 jars, 30, 50 jars. And you would hand scoop them into jars? And then I would have to pick up this big container, put it on, like, a roll cart that would be, like, you know, chest high, pick it up, put it on this roll cart, and then I'd take a spatula, and I would spatula it into a hopper that was probably, you know, above my head, and then once that hopper is full, you could stand under it with one jar at a time, and you'd put, there's a little foot pedal, and you'd stand on the foot pedal, and

32:20it would cycle this jar filler, and you'd hold the jar underneath it, and it would fill it like, like ice cream comes out of a soft serve. But what happens is, you fill it, and there's a little bit of air in it, so you have to tap it on a table, every single jar. Wow. Jar by jar. Yes. You cannot do this in your apartment. I would think that, okay, maybe I'll just find, like, some warehouse space in Boulder and just do it there, but that's not what you did. Yeah, so in order to sell to even a farmer's market in the state of Colorado, you need to

32:55have an FDA-certified kitchen facility. The ceilings are clean, and there's no rodent infestation or insect infestation, and that there's a three-compartment sink that allows you to sanitize all your, you know, utensils correctly, and there's floor drains. Now you're right, I have to find a kitchen. And so what I did is, I'm like, okay, well, I have the grinder. Yeah. Now I need the jar filler and the labeler. So who uses that equipment? Pasta sauce companies?

33:26Salsa companies? Let's find one of those. So then I found a salsa, I called all the salsa companies, and they're like, well, we use this shared kitchen facility in South Denver, about an hour, hour and a half from me. You know, we pay to use their jar filler and their kettle and their jar labeler. And so I meet this guy. I'm like, hey, how much does this cost to use this? He's like, well, I don't have any openings. He's like, we're booked solid throughout the day making all these different products. And I'm like, all right. You were asking if you could get time in this space.

33:57And here's what's interesting. So this guy, so the classic thing for an entrepreneur is we can't take no for an answer, right? We've got to find a way to get to the yes. And this was the only place that had the equipment that I needed to be successful. And they were booked. So literally, it was like, all right, well, are you guys making product at 10 o'clock at night? He's like, no, you know, we close down at, you know, 730 every night. And I'm like, well, what if I came in in the middle of the night and you never saw me and

34:28it'll just be extra money in your pocket? You'll never know I'm there. And that's what we did is we went in on off hours at the end of the day when their shift ended is when my shift would begin. And at that moment, I was still waiting tables. And I eventually switched to a different job, a side hustle in order to accommodate those hours. Yeah. I was going to ask, I mean, you're going for 10 and I, and this is in Denver, so it's an hour plus drive, right? Yeah. An hour plus drive each way. Okay. So you're doing the overnight shift there.

34:58And did you have someone help you?

35:01Yeah. God bless John Ichabone. So my first coworker, employee, partner was my roommate. He was chasing a career that wasn't something that was exciting him. And then he saw how passionate I was about this. And he's like, hey, I'm here to help. And the idea was you were, I'm assuming you're going to make a certain number of jars because they last, peanut butter lasts a long time, right? It's not. Can last about a year. Not going to go rancid quickly. And the idea was I'm going to sell these at farmer's markets.

35:33Yes, but it wasn't farmer's market season yet. So now I'm trying to get it into stores. Like natural food stores, co-ops in Boulder? Yeah. So in every store I went to said no. Wild Oats said no because they only wanted to carry, you know, a national, they only want to work with brands that could work nationally. So then I went to some specialty stores and they all said, okay, you know, we'll, we'll think about it. And then I went to the co-op here and they're like, okay, drop off some samples. We'll get back to you. And then I went to this store called Great Harvest Bread.

36:04Have you ever been to one of those Great Harvest bread companies? It's a, no, I haven't. It's a bakery, but they're, they're franchised. Okay. And there's maybe 50 of them around the country. And there's one in Boulder and I'll never forget. I went into a, it's Great Harvest Bread and they have like honey and maybe, you know, some, some jams there, like a little retail section. And I told him about the peanut butter and this guy, Scott, Scott Creevey, he, um, he looks at me like I'm like, I've got, you know, three eyes and he's like, you got peanut butter?

36:34He's like, okay. It's like, huh, interesting. He's like, all right, I'll take it. And I'm like, are you sure? That was it. Wow. And he's like, yeah. He's like, you have any, you have any now? And I'm like, I'll be back in 10 minutes. You'll be here. Right. And so then I went home and cause I had samples and things and I came back, you know, and I had a sell sheet that I made that had pricing. And then, um, so Great Harvest Bread was my first customer in Boulder. And then, um, then I got into the co-op and then I slowly got into some specialty food

37:05stores. And what, what were your, what were your products? What were your, like, I had three products that I started with. I had, uh, I had honey peanut butter. Okay. I had honey almond butter. And then I had cinnamon peanut butter. And so when I first started, um, the almonds were natural and then the peanuts were organic. And, and on top of that, what I was obsessed with was stabilizing the peanut oil. So you wouldn't have that like thick layer of peanut oil when you open the jar. And the way that some brands saw this is by using palm oil.

37:37Right. Which is what we use. And honestly, when I first started, palm oil wasn't a thing. Like when I first started, you know, I was, I was trying shea butter. I was trying cocoa butter, you know, as I'm working on all these things, you know, palm oil is introduced as a hardened vegetable oil. And so it was now this new ingredient and it's like, awesome. It's a new ingredient. Let's use it. Wow. It works. It's not perfect, right? If it sits in a hot car for too long, or if it, or if you don't add it correctly at the right temperature, so it melts perfectly, it doesn't work, but it's good enough.

38:11And it limits the oil separation, which I think solves a problem in the marketplace. And palm oil, we should mention, like, I think that sort of, there, there was a lot of controversy around palm oil for a while because some palm oil is produced by clear cutting forests, right? And, and, and so there's controversy around rainforest degradation, but you can also get palm oil that is certified and, and that's sustainably grown, et cetera. But at that time, you're talking about 2003, very few nut butters were using palm oil.

38:43Correct. So long story short, we don't use a ton of palm on our products, but when you have a food product that has two or three ingredients, you notice it. Yeah. And so peanut butter, people associate palm oil with a lot of peanut butter brands because there's only a few ingredients. And in a lot of other food companies, they have more palm oil or cosmetics, but they don't even list the ingredients. Right. And so it's a little unfair, but at the end of the day, we still use it, we own it, and we have to step up and do the right thing. And so it's just a tiny bit of palm oil to stabilize a peanut butter.

39:15Okay. But the, you know, when you're going to, to great harvest bread company and these co-ops and initially, um, give me your pitch. What would you say? I'm, I'm a owner of a store and you're, you come in and I'm like, I already, I'm already selling peanut butter. What, like, why should I sell yours? Right. So you have to know your audience. Right. And I was so good at this. I'd understand, you know, is it local that they really like? Is it, you know, something that differentiates on the shelf? Is it something that, that's the highest quality premium?

39:46You know, like what? Do they feel sorry for you? Cause you're just a kid. Right. Right. Do I remind them of their grandson? Yeah. And so, so if I'm at a specialty store, I'd be like, look, this is the most premium, top tier gray Poupon nut butter you can buy. And it belongs here in your store of all these fine cheeses and meats, right? Yeah. Or you go to a great harvest and say, look, you know, this is, you can eat this with a spoon. You don't need to add anything to it. It can go on a slicer bread and you're good to go. You don't even need the jam because we have honey and we have cinnamon or you go to a Whole

40:19Foods or, or to a co-op in this case and say, look, this is a really unique product that, you know, that has differentiation for what you're already carrying. In those first few stores, how much was a jar? And this is like a six, 12 ounce jar, 16 ounce jar, 16 ounce jar. I wanted to, to basically be the same as what was already out there. Right. Okay. And you know, it's tricky because when you're first getting started, you know, you can't price yourself too high, even though you should. And so we're probably selling peanut butter for $6 and almond butter for, for eight or

40:50$9 and, um, and not charging enough. Right. What were your costs? What do you think your costs were to produce a jar of peanut butter? You know, probably $4. And so I was making virtually no money on any of these things. And, and it was, it was a hobby. This wasn't for me to, to make money. This was for me to, to build something that someday could be a business that makes money for me. It was real. I treated it as a business, but I'm working on waiting tables. Now at this time in my life, I'm working at REI, which is a sports, you know, retailer.

41:25And I'm, and I'm not paying myself. I'm paying my roommates. I'm paying the kitchen I'm working at. I'm everyone else except me because I already have a job. And I know that if this thing works, eventually I'll get paid. And, and you are in some of these stores. How were you selling? I mean, how, I mean, if they're just sitting on the shelf in a store, how were people discovering them? Were they, did anybody buy them? No, no one was buying them. Right. So I would, um, I'd set up a demo.

41:56So I would, you know, dedicate time to set up a table and I would hand out samples. And, and that's where the farmer's market down the road became such a great avenue for us. Because you're standing at a table and you can talk about this thing. So, so imagine the farmer's market was probably a really important sales channel. It was, it was so important. So, so, so now it's, now it's into the winter and, and it was tricky even getting the farmer's market because, you know, we're not an agricultural product that's grown locally.

42:27Right. Cause peanuts are grown in what? The South. Georgia? Or, yeah, ours are from primarily Texas and New Mexico. Cause it's a drier climate. Right. So the farmer's market says, you know, yeah, I don't know. You know, I don't, there's a good fit for us. And you're like, oh shoot. Like, well, I'll tell you what, you know, I'll make a deal with you. How about we'll come in early in the spring before all the farmers start to harvest their vegetables. And once all the farmers come in and the honey vendors come in and there's no room for us, we'll

42:59leave and then we'll come back again in the fall when more space opens up because you'd rather be selling something than nothing. Right. And then once I got in, you know, and there was probably the first farmer's market a week or two, they kicked us out cause there wasn't any room and people complained. They're like, where's our nut butter? And then all of a sudden I was able to get a little corner, you know, not a full 10 by 10, but a little, little corner. And I could, you know, slowly work my way in and become a regular. What were people attracted to the honey peanut butter, the almond butter, the cinnamon butter?

43:32Like what, what kind of reaction were you getting from people? It's the whole experience. Like people just love to buy a product from someone that they can look, look in the eye and be like, you made this. Wow. That's really special. And the other thing that really helped the guy is like, we're the only nut butter company there. So it's not like you're at the store price shopping for what is the cheapest. You're like, well, I need peanut butter and there's the only one here. And so that was really fun. The biggest learning for the farmer's market for me was two things.

44:04Number one, I realized you can't make everyone happy. Right. So eventually someone's going to come by and be like, you know what? I don't taste enough honey in this. Or you know what? This is too sweet. Too much honey. And then they're telling you, can you add less honey? You know? And you're like, oh yeah, yeah, of course. I'll work on that. You know? And then after like a year, you're like, you know, it is what it is. And if you don't like it, I'm sorry, but I'm not changing it. You know? Because when you first launch, you want to make everyone happy.

44:36And you're like, okay, well, how do I create something that everyone's going to love? And then you realize, okay, I just got to put my, you know, line in the sand. And this is what it is. I'm not going to change it. But the second thing I learned, which was so fun for me to learn, was when I first launched, you realize I didn't have like a plain peanut butter. Everything had a flavor to it. Because that was, to me, that was the big point of differentiation. Right? So, you know, you have the farmer's market and someone comes along and they're like, oh my gosh, this is so exciting.

45:08You're brand new. I'm going to take the tour. I'm going to try them all. And maybe I had four or five different products. Because I would come up with some specialty ones like pumpkin pie or chocolate or something, you know? And so someone would come up, oh my gosh, okay, I'm going to try them all. I'm going to try them all. And they'd be like, oh, the honey. Oh, that's really nice. It's really, really subtle, but I really like it. Oh, there's a maple, a maple almond. Wow, that maple really complements the almonds. I really like that. And okay, here's another one. Oh, the pumpkin pie. Oh, that's just too much nutmeg for me. Too spicy. Okay. What do I buy? I want to support you.

45:38So I'm going to buy something. Okay. So what should I buy? Hmm, what should I buy? Well, do you have just plain, plain peanut butter? And I'd be like, no, no, I don't want a plain. Like, why would I have plain? You can get plain at the grocery store. Well, you know, I really like you and I really like supporting local and I really want something I can have every single day, not just on a special occasion. Like the cinnamon would be once in a while. And then I was like, oh my gosh, well, that's interesting. So then the next week I came back with classic, right?

46:09Not plain. Nobody wants something that's plain. So it was called a classic. And guess what? It became our bestseller, right? Because people just wanted something simple. And now I'm scratching my head. I'm like, well, I thought the flavors are what was important. But people just want to support something that's local and that tastes good. All right. You're getting feedback from people and you're adjusting to it. But here's the big picture, right? You're working at REI. You're waiting tables. You're making peanut butter in Denver. And you're demoing it at a farmer's market, at least one, farmers, maybe two, on the weekends.

46:43Like, that's a grind of a life. Like, you're living off your other jobs. I'm certainly breaking even, you know, on good days. But I was having so much fun. Like, it was fun to be in a community of other entrepreneurs, of other food companies. But I knew that it wasn't going to last forever. I knew I had to figure it out. And I didn't have a girlfriend. I didn't have a dog. Like, this was all I wanted to do. So, as I'm in the farmer's market, I'm like, okay, scale is what I need.

47:14And then when the farmer's market ended, for me, it was like, okay, once I get into Whole Foods, like, game over. You've done it. You're just going to have this big company and let's get to Whole Foods. Like, that's the goal. Okay. So, that became my obsession is how do I get into grocery food stores? Okay. And when you say when the farmer's market ended, just seasonally, it ends. It ends in like November or whatever. The idea was – and this is a time, 2005, 2006, when you could walk into a Whole Foods.

47:46It's harder now because it's, you know, it's owned by Amazon. But you could walk in and get the store manager and they would – you could get them to put a product in their store at that time. Like, you could have that conversation. Was that – did you do that in 2005 or 2006? I mean, or not quite yet. So, 2006 was when I started to deliver to retailers. And here's how it started. I had kind of an idea of how this might work. And so, then I walk into the one Whole Foods that was in our town.

48:18I ask who the grocery buyer is and that the buyer is, you know, at that moment in time stocking a shelf. And I walk up and I'm nervous and I'm in my 20s. And I've done this a few times but not with Whole Foods. And so, I asked the buyer who's like wearing knee pads and he's, you know, stocking something on a low shelf. And I'm like, hey, do you have a second? I can ask you a quick question. And this guy's name is David, David Spice. And he's like – looks up at me and he's like, yeah, come on. Spill it. Spill it because I got a lot of stuff to do here.

48:48And I'm like, hey, my name is Justin. I have a food company and I really want to sell it to – as soon as I said that, you could kind of see I lost him, right? He's like, God, you know, kid, I hear this five times a day. Like, he's like, all right, stands up. He's like, look, here's what I need you to do. I need you to get into a food distributor called UNFI. You know, UNFI is who distributes all of our food products. Once you work with them, then I can bring you in. And I'm like, oh, it's that simple? I'm like, okay, hey, thanks. I'll let you know when I get into UNFI. And so then I go to UNFI and they're like, oh, we can't get you just into one store because we have this big warehouse.

49:25And in order for us to get enough economies of scale to deliver to enough stores, you need to be in at least 30 or 40 stores, which is usually the whole region. And I'm like, well, I don't want to be in the whole region. I don't have enough capacity for that. I just want to be in a few stores. And she's like, well, you know, maybe they'll make an exception and just work with you. And I'm like, well, oh, okay, I get it. So it's going to be harder than I thought. So then I go back to Pearl Street and I find Dave Spice, who's, you know, again, working in the store. And so the next time I came in, I was ready.

49:57I'm like, hey, Dave, it's Justin. Hey, I went to UNFI and they said that they can't just deliver to your one store. So what if I come in and I'll check my own shelf and I'll deliver just what you need. And then I'll walk it out to the shelf and I'll stock my own shelf. And so you'll never even have to worry about it. He's like, well, that all sounds great, Justin. But, you know, I'm nervous as a new product. No one's going to notice it. Are you going to be able to support it? And I'm like, how about if I'm here every day and I'll do a demo and at the end of a month or two, if we don't sell enough jars that makes you happy, you can take everything off the shelf, give it to the staff, take it home.

50:38And it's free. It's on me and you'll never see me again. And finally, he was like, oh, my gosh. He's like, okay, fine. Like, take your jar, take it over to, you know, this person at scanning and let's get it set up in the system and we'll see you next week. But you're starting in this one store in Boulder. Starting at one store. And I thought that by getting into the store, it would be this big unlock. Once I was on shelf, I kind of thought, okay, everyone's going to notice it. It's going to be great. And then, like, nobody really noticed it. I had to stand there, like, three, four times a week and hand out samples and get people excited about it.

51:14But still, like, the internal optimist is like, okay, well, hey, this is just one store. Let's get into 30 stores because then once UNFI has it. But you can't get into 30 stores if you're not doing well in one store. Well, well enough, right? And, like, you know, so you get into the store and maybe, like, you know, two weeks goes by and it's like, okay, well, I got to get into another store because I can at least. I can't service 15 stores. So now you go to the Whole Foods across the next town over and you're like, hey, you know, David over at Whole Foods Pearl.

51:46Well, hey, he just brought us in. You guys should be carrying us here. And they're like, well, are you and UNFI? Oh, no, no, no. I'm going to deliver it. I'm going to stock my shelf and I'm going to do demos. And they're like, well, okay, well, if David has it, then I guess we'll try it. And then, you know, you really leverage that one relationship. And then I would get into more and more stores and I would deliver to these stores and I would be kind of like, you know, for me, it was like, all right, well, Pearl is doing okay, you know, and these other stores, if I can get them to do what Pearl's doing and now I can get into 30 or 40 of those.

52:20You know, the target's always moving. So now the target's moved from getting in the farmer's market to getting into Whole Foods. All right, now I'm in Whole Foods. Now I got to get into UNFI so I can get into more Whole Foods and then I'll have made it. And so the target's always moving. And how many stores were you, I mean, how many stores are you able to get into just going store by store on your own and doing your own deliveries? So 2006, I'm like two or three years in, I could deliver to specialty stores, I could deliver to natural grocers, and I could deliver to Wild Oats into about 10 to maybe 12 Whole Foods stores.

52:59So now I've gotten into about 25 stores. Wow, so 25 stores. Okay, so and at this point I think you were, you're ready to go to UNFI and they became your distributor, right? This is like around 2006, I guess. And you're now getting into stores all over like Colorado and Texas and New Mexico. So at this point, like how much were you doing in sales? Were you, were you breaking a million? Yeah, no, we were probably around $150,000 in sales.

53:33Right, so you were really tiny, small, small. Yeah, and the thing about peanut butter is the velocity of it, right? So the velocity is how often it moves off the shelf. And for a consumer, you might buy peanut butter once a month. If you're a heavy consumer, once a week or once every two weeks. And so it just wasn't flying off the shelves like a bar or an energy drink would because you'd have one every day. So now I'm, you know, I'm a few years in.

54:04I'm working, you know, now at REI. You're still working at REI and doing all this stuff. Okay, and how many shifts were you doing at REI, by the way? About three or four days a week. I work at REI part-time. And it was mostly to maintain the minimum to get health insurance and benefits. Right, because they provide health insurance. And at this point, I realized that this isn't working because now I have real data. I'm like, oh, I was a little overly optimistic on how many, you know, jars I was going to sell my first year.

54:36At this pace, it's going to take me a lot of stores to get to the scale that I need to, you know, break even. I'm like, oh, man, this is – so now reality is setting in. And when I would get really, I don't know, nervous or upset, I would go and exercise, you know, go on a big bike ride, go on a big trail run. You clear my mind, come back exhausted and just feeling refreshed the next day. And so I'm on a big mountain bike ride, you know, and this is now 2006-ish, 2007.

55:09And I'm on a bike ride and I'm eating a squeeze pack of an energy gel. Yep. And as I'm eating the energy gel, I'm like, man, you know, this energy gel is good, but why isn't – I really want peanut butter. Why isn't anyone putting peanut butter into a squeeze pack? It just comes to you like that. Well, it makes sense, right? You're one of these, like, goo gels or something. Yeah. Yeah, I'm with peanut butter all day, every day. Yeah. And here I am with a gel pack, you know, and I'm like – and I just put one and two together and I was like, why isn't anyone doing this? Holy cow.

55:42When we come back in just a moment, Justin quickly discovers why nobody is putting peanut butter in a squeeze pack and then decides to do it anyway. Stay with us. I'm Guy Raz and you're listening to How I Built This.

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