Late July Snacks: Nicole Bernard Dawes. Crackers and Cookies were Failing… Tortilla Chips Saved Them

Introduction

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3:09That's three months of free payroll at Gusto.com slash built. One more time, Gusto.com slash built. So, we debuted the company in 2003 at the Natural Products Expo in Baltimore, and we basically left that show a national brand. Okay. All right. So, basically, we got all these great orders, but we also got a lot of customers where they were really excited about the idea, but organic maybe hadn't taken off in their chain yet, and their customers didn't really know what it was.

3:51So, we got a lot of big orders from stores that probably shouldn't have given us big orders. And about two months after that show, our sales just disappeared completely.

Growing Up with Cape Cod Chips

4:02Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

4:21I'm Guy Raz, and on the show today, how a family potato chip company gave rise to a brand new family business, Late July, a brand of organic snacks that struggled for years until it found its hero product.

4:41There's something that happens when you build your business around a highly specific type of product. Most founders passionately believe in it, and naturally, they spend years trying to make it work. But sometimes, maybe more than sometimes, it just sputters along. This is what happened to Nicole Bernard Dawes. Her dad, Steve, founded Cape Cod Potato Chips back in the early 1980s. It started as a tiny storefront in Hyannis on Cape Cod, and over time, it became a huge success.

5:13So, when Nicole decided to start her own snack company as an adult, her dad helped her get it off the ground. The company was called Late July, and Nicole focused on making organic snacks, mainly crackers and then sandwich cookies. But the business struggled to really grow. And then, just as the financial crisis of 2008 started to hit, Nicole's dad died. Just weeks later, the bank called in a $3 million loan. Suddenly, Late July was in real trouble.

5:45Actually, it was technically in default. And Nicole needed to figure out a way to save the company fast. And the idea she came up with was pretty simple. And it was the last best chance the company had to survive. That one idea didn't just save Late July. It completely transformed the business, which was later acquired by Campbell's. After that, Nicole would go on to start another company, this time in flavored sparkling water and soda, a brand called Nixie, which we'll hear about a little later.

6:17As for Nicole, she grew up, where else? On Cape Cod, in the beach town of Chatham. Her mom ran a small health food store there. But it was her dad who first had the idea to start experimenting with snack foods. My dad loved food. Like, he loved to cook. And, you know, I think he was feeling like this natural food store, like, conceptually, he liked the idea. But he didn't really understand why there couldn't be just a natural potato chip in there.

6:48Like, why wasn't that a thing? But what motivated him was he had read an article about this in Parade magazine. I don't know if you remember Parade magazine. Sure. It was in the Sunday supplement of the newspapers. Yep. And there was an article about this, like, old-fashioned way that this place in Hawaii that was making potato chips and tourists were coming in and buying them. And, you know, my dad sort of put two and two together. And he thought, well, we live in a tourist place. And, I mean, how hard could that be to make potato chips? And I'm going to do that.

7:18And he rented a small storefront. And my mom still had her health food store totally separately. And then my dad started this storefront, which was in Hyannis at the time. And he was only selling potato chips in this little storefront? Correct. Okay. His brother had been making, like, fried dough at fairs. So he had, like, the ability to, like, fry things. And, I mean, he learned a lot really fast about how not to cook potato chips. But long story short, started this company.

7:48But what happened initially was it did not work. I mean, it was, I would say, a pretty big failure. It's hard to make super starchy chips crispy unless you— Well, no, the chips tasted excellent. Just no one knew they existed. I don't think he really thought, like, is this the absolute best location for tourists to place this business? You know, there was a few other factors that maybe weren't fully fleshed out. And the first year, it almost went out of business. But, unfortunately, a car came through the front of the business.

8:21The man has a heart attack. He drives his car through the front. It was a glass front. Glass goes everywhere. The car stopped just short of the counter, which is where I was sitting on the ground, like, drawing. And, basically, what happened was that this car going through the front of the business got the potato chip company on the front of the newspaper. Hey, earned media right there. Right. And, at the same time, the insurance money from the fact that the business was destroyed, basically, was just enough to propel the company through the winter on Cape Cod and make it to that next summer season.

8:56And, by that point, people had heard about the business, and it kind of just took off. Wow. So, this unfortunate, weird, just, like, freak accident turned out to be something that really helped sustain the business. So, all right. So, he starts this kettle-cooked chip company. And I probably imagine when people tried them in 1980, 81, 82, they were like, wow, this is different than a Lay's potato chip or whatever was around, you know, Ruffles. Like, this is really crunchy and really different.

9:26It tastes like something I might get at the county fair. Well, they're different because they're cooked completely differently. Like, a Lay's is cooked is a continuous cooked chip, which basically, I mean, versus a kettle-cooked chip. It's a conveyor belt, right? Yeah. And so, just the whole way it's cooked, just every, I mean, just, it's a completely different type of experience when you eat a Lay's chip versus a Cape Cod chip. And so, you know, I saw that this was possible. And I honestly saw that my dad did this with effectively nothing. You know, he didn't come from a big, long line of people who knew how to do this.

9:59You know, he just got an idea, and then he did it. And so, I think, you know, I mean, it was obviously something that, as a kid, I was very frustrated that in my mom's store, there wasn't more products. Like, I didn't understand why other people weren't, why would you make a product that tasted that bad? Like, I just couldn't connect the dots on it. It's interesting that you mentioned that your dad, like, your mom had this grocery store. And I remember, you know, the 80s, if you went to a food co-op, like, if you went to what is now the equivalent of Whole Foods in the 80s, it was carob chips and spelt flour.

10:34It wasn't, you know, it was, like, still very alternative kind of foods. And so, this was around the time where that transition started to change where people were saying, well, hang on, you know, could we just take the delicious things that we like and just make them slightly better? You know, like, use better oil and, like, organic potatoes and make them in smaller batches, right? I mean, that was what was happening. I mean, that is what has driven me for my entire career. People always ask, you know, you had a mom at the health food store, a dad at a potato chip company, you know, how did that help shape you?

11:08And, I mean, it's very clear to me that it 100% helped shape my perception of what type of products needed to be brought into the world. Because I would go to my friends' houses for dinner or for sleepovers and they would have certain types of cookies or cereal or crackers or snacks. And it was nothing like what we would have in our house. Right. And they were delicious because they were filled with sugar and chemicals and all those things. And they were delicious. Cap'n Crunch and they had, like, Oreos and Twinkies.

11:42Meantime, you're eating carob-covered rice cakes. Correct. And obviously because I saw what my dad did, you know, I knew it was possible. You know, I knew that this was something. So it's like, to me, it was like businesses were making a choice to make these bad tasting products. Yeah.

The Sale and Repurchase of Cape Cod

11:59Your dad sells the company in 1985 to Anheuser-Busch. Tell me what you know about that. I mean, five years in, was it an offer he couldn't refuse? I mean, how big did Cape Cod chips get, you know, in five years? Not very big. I mean, it was still just basically New England. And I think what was really happening was, you know, initially he wasn't interested. But after several attempts of getting him to sort of come around to the idea, eventually he decided it was probably the right thing for the brand.

12:34So he sells in 1985. Yes. And was, I mean, was that like a windfall? Does that mean like he was set for life at that point? No. I mean, it was a windfall in that completely different from anything he'd ever experienced in his whole life. And obviously for our family, it made an enormous difference for us because prior to that, you know, running a small natural food store, none of these were really a get-rich-quick scheme. They were a get-rich-really-slow-if-at-all scheme.

13:05So, you know, I think the idea that he wouldn't have to worry, he could take care of his, you know, that we would be okay was highly compelling. Okay. So now he is working for Anheuser-Busch. Correct. And, you know, you are growing up in on the Cape. And I guess you go to college, you go to Tulane. Yep. So a completely different world, New Orleans. And when you graduate from Tulane, it coincided, this is 1995, I guess it coincides with an opportunity your dad has to buy Cape Cod back from Anheuser-Busch.

13:41What was going on? Did they kind of neglect the brand? I mean, did they just kind of let it die? I mean, what was the story that you know? So they actually, Cape Cod Ships was doing extremely well. What happened was they were going to divest their whole snack division and my dad got the opportunity to buy it back. And I remember I was in the car with my dad and my now husband and we were driving somewhere and he gets this call. And it was sort of like, are we going to do this?

14:17Yeah. I mean, it must have been a lot of – I mean, I imagine he had to find investors to help him because now the price was going to be higher than what he sold it for. It was actually much lower. It was lower. Yes. Wow. That's amazing. So he actually could buy it for less than what they paid him for it. But the challenge was that basically by the time he was buying it back, they would have lost all of their distribution and essentially all of their manufacturing. So he was really just buying the brand name. Yes. Okay, so you join this new venture, right?

14:49Basically, he finds the money to buy it back. And, I mean, do you remember how much it was? Like, was it in the – I mean, it was under $3 million. I don't remember exactly. Under $3 million? Yeah. That's incredible. He was able to buy the brand. Okay, so 1996, buys a brand, and you join him, and there's going to be a lot of work because you've got to find, what, a manufacturing facility or what? We just reopened the manufacturing facility on the Cape. And so it had been closed as part of this closure, but we were able to, like, get all the employees back and reopen it, and that was actually very exciting.

15:29Can I ask a practical question here? I mean, making this – it was in Chatham or was it Hyannis? Hyannis, yeah. And Hyannis is – it's probably the closest sort of larger town, like, as you get into the Cape, I think, right? But it's still, like, for trucks to go there and then to drive out of there and drive all over New England, like, from just a practical standpoint, it's not very practical, right? Like, what was the advantage of putting it, the factory, in Hyannis, which was, you know, you had to drive into the Cape, and then all these trucks had to drive out?

16:01There was no advantage. Okay. All right. Just joking. Just joking. No. There was nothing – I mean, I think the only thing practical about it was that it was reasonably close to where my dad lived. You know what I mean? There was nothing practical about it. Yeah. I mean, the only thing that was practical about it maybe was that we had a factory tour, and at the time, you know, when we reopened it and redid the factory tour, I mean, we were the second largest tourist attraction on the Cape after the National Seashore. Okay. So it was, like, Ben & Jerry's kind of, like, going to Ben & Jerry's. Yeah, yeah. Okay. That makes – I mean, that makes sense, but still, like, you joined – and by the way, what was your sort of official title when you joined?

16:35I ran the marketing department. Okay. But I did innovation, too. So, Nicole, I'm curious when you – so, you know, you guys start to build the team back together. It costs $3 million to buy it back, which is – it sounds like a lot to some people, but in the grand scheme of things, it's nothing. I mean, it's like a fire sale. But still, he had to – you had to finance production. You had to finance the business. So how did you guys do that? Did you have to take loans out? Did you have to find investors right away? Yeah. He brought in investors to purchase it back.

17:07And honestly, that was one of the things – that was a really, like, early lesson to me was – I mean, I don't think I ever fully recovered as a child from the first time he sold the company because, you know, that was very disappointing for me when I was 12. Like, I saw Cape Cod chips more like a sibling than I did a company. I mean, I grew up in that factory. Like, I knew how to operate like a pallet jack probably before I could ride a bike, you know. I mean, I spent so many hours sorting chips and, you know, just being there. And when he sold it, I was, like, devastated.

17:38And when he bought it back and I got the chance to go back and work there again, I was just very, very excited. And I had all these ideas. And just going back to my background with my mom's natural food store, I was very into the idea of organic potato chips and trying to use organic potatoes and creating even cleaner ingredients and, you know, really just bringing as much of that focus into the brand as I could. And, you know, I think part of what I didn't fully realize at the time was that the investors that he brought in were not really thinking long-term.

18:10They had a very short-term window on what they wanted as a return from the business. But I did get the chance to develop what would become still one of their best sellers today, which is the reduced-fat potato chip. And it was a very exciting project to work on. I was extremely proud of it. It launched and almost immediately did really well, which is very, you know, just – I mean, I learned so much from doing that from start to finish. All right, so your dad buys the brand back in 1996 with investors.

18:47You were helping to run it. But then he actually sells it again just a few years later to a snack brand called Lance. And I think that amounts like $30 million. So a pretty great return on that $30 million that he raised. But I guess for you, it meant something different. So, yes, I was devastated for the second time about, you know, the loss of Cape Cod chips in my life. You know, but it was such a good lesson for me.

19:17And I also realized that, you know, my dad and I were obviously at vastly different points in our career. And, you know, my dad wanted to retire. He was ready to live that life. I was just starting my career. So I was very excited about the idea of running Cape Cod chips for the rest of my life. How old was your dad around that time, 1999? Oh, God. Probably like around 50. Oh, so he was a young guy. Yeah, yeah. So he didn't want to – he was like, you know, I'm good. This was fun. Now I can do other things.

19:49Yeah. And I think that me, on the other hand, I would say the one thing that was really interesting timing about this whole thing was I was just about to get married. I do highly recommend that you sell a company right before you plan a wedding because it does make it one hell of a party. But, you know, it was just like I was starting this new phase of my life where I was ready to roll up my sleeves and work as hard as possible. And I stayed on a transition and then I, you know, started working on what would eventually become late July snacks.

Launching Late July

20:19You knew you wanted to start your own company. Yes. You didn't want to go work for somebody else. You were like, I'm going to figure out my own – and it was going to be in food, in snacks. I knew it was going to be, you know, like a food consumable, let me put it that way. But there was a brief moment where I was contemplating doing something for dogs. Oh. But I just didn't feel like it could be like authentic to me because I didn't feel like if I could eat the product, I don't know that I could sell it. Yeah. So then it morphed into like a snack mix company.

20:51I actually was renting space at this like shared kitchen on Broom Street in New York City and I was working on this experimental like organic snack mix. That's a cool idea. I mean it's been done now, but that was a cool idea. Yeah. It hadn't been done yet. It had not been done then. No. No. Like a Chex mix, but like organic. Yeah. And so it was delicious. I remember I had these cute – I was calling it the Mulberry Snack Company. I had these really cute little bags and I brought them to show my dad and he was like, that's never going to work.

21:27He's like, that's – He didn't think that Chex mix thing would work. He's like, your cost of these products, you're going to have to sell it for so much money. It's going to be such a specialty item. You're never going to be able to mass produce it. You're going to have all these problems. I don't know why though because you would just source all those things from different manufacturers and just mix some Worcestershire sauce and, you know, a couple spices and you're good to go. Well, that was what I thought too. Right. But, you know, I was getting a lot of negative feedback. But in the process of working on it, I was now pregnant with my son and I was going to the – my local health food store in New York City,

22:03which is called Integral Yoga and it was on 13th Street and I also did my prenatal yoga there. And it was like kind of an old school, reminded me a lot of my mom's health food store. And I noticed something really interesting one of the trips when I was in there and that is that as much as the perimeter of the store had sort of changed, like there was beautiful produce, the dairy items were now organic and different and interesting. But when you went into the center of the store, I mean it could have been my mom's 1970s store.

22:34I mean the – like the snack section was just equally as depressing as it was when I was a kid. And I was pregnant so I just really wanted some crackers and I went to the cracker section and it was like you almost had to like take a time machine into the section of the store. And I thought that's a huge category in the conventional world and, you know, nobody really seems to care about it in the natural food world. And I thought maybe this is my opportunity.

23:05Crackers. Yeah. So, I mean I think it was a combination of being pregnant, really wanting crackers and, you know, not finding any. I mean it really – and not to sort of downplay the brilliance of entrepreneurs at this time, but like in a sense it was like shooting fish in a barrel. Like there were so many products that had not yet been made organic yet or good, right? There were just – there was a lot of opportunities in many different food categories.

23:35Well, I think what else happened right then, which I think is very important to mention, is that at this exact same time that I was doing this, the Organic Food Production Act passed. And with that, the USDA Organic Seal was born and then all of a sudden now if you're not following these rules and regulations, it's a federal crime. When other food companies put nutrition facts or do their ingredients, there's nothing really that regulates that.

24:06I mean there's truth in advertising and that type of thing, but there's no rules around, you know, how you do that. But with Organic now, you had this very strict set of rules and this brand new seal that debuted. So late July launched with the USDA Organic Seal and I mean I think we were one of the first brands, if not the first brand, to have the entire brand launched that way. Like we never existed without it. And it was a cracker company. That's what it was. Correct. Yeah. And you called it late July because that's when the harvest begins for wheat.

24:39Like what – tell me what this – the name. Well, I think we could go back to the beginning of growing up on Cape Cod and late July is that perfect moment in time. You know, you're knee deep in summer. Tomatoes and corn are starting to just come out and – right? And, you know, you're in the throes of summer vacation. You're not even thinking about going back to school. You're spending extra time with family and friends. The weekends are even more special. I mean just everything about that time of year to me – I will say full disclosure, my birthday is July 30th. So there's a chance that also has a reason I like that time of year.

25:12But I – you know, it's just to me it's that magical special time of year.

25:17Okay. So you launch – now – and by the way, before we get into how you launched, I mean how did you finance this business? You wanted to make crackers, an organic cracker, and what – how did you get the cash to start it? Well, I had a small amount of money from when we sold Cape Cod and I used all of that. And, I mean, I didn't need very much to start. You had a co-packer, a co-manufacturer. Yep. We had a co-packer. I mean, my basic starting expenses were this wonderful graphic designer that we hired.

25:52We had, you know, legal fees. Basically, I was the only employee in the beginning. And then I brought my dad out of retirement, which he – I mean, I wouldn't say he like reluctantly came out of retirement, but he definitely – I think he semi came out of retirement. You asked him to help you with the business. Yes, yeah. So I'm assuming that that was a pretty inexpensive cost because he was probably doing it for free. Oh, yeah, yeah. I know neither one of us. I mean, I don't think I made a salary for years. I mean – And tell me about the product. It was like a saltine cracker?

26:24Like what kind of cracker was it? So, I mean, the plan was, you know, I wanted to take the three most popular crackers, the three best-selling – Yeah, a Cheez-It type product. So it was a cheese cracker and then a saltine cracker. And, you know, what was so hard though is even though this great organic law had passed, there was still no suppliers. So, I mean, there was maybe one supplier of flour, one supplier of cheese, one supplier – I mean, it was very hard. They were organic suppliers. Oh, yeah, right. Exactly.

26:55It was very, very difficult to find every component you needed and get it organic. And everything was new. So it was – you know, you were having to do a lot of convincing. Like there would be a cheese – an organic dairy that would – you know, had cheese potentially that they might drive for you to turn into cheese powder that you could use in your crackers. But it wasn't like there was, you know, a thousand options to choose from. Okay. So you have – or you're going to do three crackers and you've got some capital to get an initial run. And how did you get into the stores?

27:27I mean, did you – I imagine you had some relationships from your time at Cape Cod. So, I mean, did you start with Whole Foods? Like did you – was – I mean, Whole Foods was a thing in 2003 when you launched. Yeah. Where did you first, like, have this available? So we debuted the company in 2003 at the Natural Products Expo in Baltimore. And we basically left that show a national brand. You signed up with a bunch of different – Yep.

27:58Like national retailers or regional retailers or both? Everything. I mean, we signed up with Whole Foods nationally. We got two big distributors. I mean, like – I mean, as you previously mentioned, there was nobody doing this. If you had a natural food store and you wanted to sell crackers that were organic, we were the only brand. And did it require – like this is a – I'm asking this question because oftentimes we've had founders who are like, yeah, I get this contract and it sounds exciting. But actually it creates a nightmare challenge because you have to find the capital to produce the product and you're not going to get paid by the customer for 90 days.

28:37Did you run into that problem or were the orders manageable enough where you could actually do it with the cash you had? I mean, we could do it with the cash we had. That wasn't our problem. Believe me, we had a lot of other problems. Okay. But that was not our problem. So basically we got all these great orders. And obviously Whole Foods is an incredible customer. But we also got a lot of customers where they were really excited about the idea but organic maybe hadn't taken off in their chain yet. And their customers didn't really know what it was. So we got a lot of big orders from stores that probably shouldn't have given us big orders.

29:12And about two months after that show, our sales just disappeared completely.

29:18When we come back in just a moment, Nicole looks for a way to revive her sales and faces a major crisis personally and financially when her dad dies. Stay with us. I'm Guy Raz and you're listening to How I Built This. We get support from U.S. Bank, a question I love asking founders. What's the one decision you almost didn't make, the one that changed everything?

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Pivoting Away from Crackers

34:48I'm Guy Raz. So, it's the early 2000s, and Nicole is trying to recover from an unexpected dip in cracker sales after store customers seem indifferent to the product. And in order to help turn things around, she brings in a new person to help, her husband, Peter. And what's his background? Is he a finance guy? No, he was in the film business, like movies. Right, okay. That's his background. Yeah. And, you know, marketing, and he's very creative. He's, I mean, he's honestly great at a lot of things, but that was his background.

35:22He's your dad, too. And your dad is, he's a skilled operator. I mean, he has run a snack foods business. I think the things that were very different about crackers and snacks, there was a few things, assumptions that we had made in our financials that were wrong. Basically, I mean, if you think about it, you go through probably 10 to 1 bags of potato chips to box the crackers. Easy. I can't remember the last time I bought crackers. Right. You know, I think we were assuming a much faster velocity on crackers than we got. And why is that?

35:53Is that because people just buy potato chips, pour them in a bowl, and stick them in front of the TV, or when people come to their house? Like, you would have crackers if you had cheese, I guess. Yeah, you just— But, like, why? I mean— Yeah, people just—crackers are more of an occasional use item, and chips are, you know, you tend to open a bag and finish it. And you didn't—they didn't come into focus until you actually started selling your products. Right. And we realized, okay, we're not getting the velocity we thought we would, and there's so many other things about that. And you had the comparables from the chips, because you were like, why aren't these selling like the potato chips?

36:26Yeah. But, I mean, kind of the vision was there, right? I knew I wanted them to taste like the conventional ones. I mean, I have built my entire career out of making organic and natural products, healthy organic natural products, taste like conventional ones. And I think we did that. Like, I think they really did taste great. You know, nobody—we just—we didn't have anybody for marketing. Nobody knew we were there. And we were doing— How many people were—were you in 2003, 2004, or 2005? Like— Oh, like at the company? Yeah. Um, oh, like five.

36:56Five people. Okay. So you were lean, and you were running it out of an office in New York City? No. I had actually moved back to Cape Cod at this point. So you're running it out of Cape Cod, but using co-manufacturers in, like, where? What part of the country? Ohio at the time. Yep. And just as an aside, why wouldn't you pursue your dream of organic potato chips at that point? Were you restricted by, you know, because of the sale? No, you know, I think it was part of the issue was—I do still, like, love Cape Cod potato chips.

37:28I felt very connected to that brand. I don't know that I ever fully wanted to compete with it, to be honest. And I also think, ultimately, I wanted to make a healthier product. Like, I think what I wanted to feel good about was putting a product out into the world that was a little bit healthier, still organic, tastes delicious, like all of those things I wanted. But, you know, I don't know that, like, potato chips is really, like, my thing. I'm curious. Did you—you know, people probably made assumptions. People who knew you or knew your story a little bit made assumptions like, oh, you know, she's the daughter of the Cape Cod people and they're just, you know, swimming in cash and blah, blah, blah, which was not the case, right?

38:07I mean, you had some money from that, but not enough to fund your business forever and sustain your life. But also, you know, I wonder if you ever—at that time, if you ever felt like, I need to prove myself here. I need to show that I'm not—you know, this isn't coming easy to me. Well, I think it's a couple things. I mean, one, I didn't have any money. I mean, my dad was not a big giver of money to his children. I mean, people didn't know that, right?

38:37They just knew that you were the Cape Cod chips family. But, I mean, I don't deny that I was very lucky. And I, you know, I don't deny any of that. I mean, I grew up in an environment where my dad gave me the ability to do this, follow my dreams, and my mom, you know, like, I'm fully aware of how lucky I was and how grateful I am for having had that. But, I mean, I think that everybody, you know, nobody really believed any of it was mine. I mean, even though I started the company, I mean, everybody thought my father was doing it.

39:09And, I mean, I did want to prove myself, but mostly I just wanted the company to succeed. And I also really felt strongly that the only way to help the organic food movement grow was to make delicious-tasting products that people would, like, back into finding out about how they were made. Like, someone would pick up a box of crackers at their friend's house and be like, wow, these are delicious, and then say, oh, these are organic, and then get excited about the fact that they're organic in hindsight.

39:39All right. So, the cracker brand is doing okay, right? But now you're several years in, and the underlying problem with the business still exists, which is you don't really have a hero product, right? And as you've said, you still aren't growing as fast as you'd hoped, right? Well, you know, one of the things I think about the food business is it's very hard to be a national brand that isn't growing fast. It's just, like, our business isn't designed to support, like, slow, steady growth.

40:12But I really believe in slow, steady growth, because I think that that's how you build a strong foundation. I think if you can make your mistakes fast and as small as possible, that's going to be much better for your brand in the long term. I think one of the challenges we were having is just some of our products were so expensive. At this point, we realized that Crackers wasn't going to really be our future. We were trying to figure out what our next pivot was going to be to, you know, what is the product line that is adjacent to these Crackers but can, like, catapult our brand to the next level.

40:43And, you know, we had experimented with a few different things. Like, we had some sandwich cookies. And, again, like, I felt like we were getting, like, further and further away from, like, my vision of, like, health and all these things. But I will say the sandwich cookies were – we used real dark chocolate. I mean, they were really good. They were like Oreos. But they – but instead of, like – I mean, we used, like, real Madagascar vanilla, not, like, vanilla flavor. Organic, too. Yeah. We used real dark chocolate that we made ourselves. I mean, there were so many things about them that were just so incredibly special.

41:14But they should have been, like, three times as expensive as what we were charging for them. So you were – you were basically – you were losing money on every sale of cookies? I mean, not on every sale, but if they were on promotion or – I mean, we just – it was very difficult to make money with those cookies and – Especially with those ingredients. Yes. Yep. All right. You did take some investment on, I think, in 2007, right? You did have this snack brand, Snyder Lance, which had purchased Cape Cod a decade earlier. They put in – they bought about 20% of late July in 2007.

41:47Yes. We were at a trade show, and they asked us if we would be interested, and they had this manufacturing facility that they had just bought, and it was – you know, it wasn't really being utilized fully. Would we be interested? And as it turned out, we were very interested because we were – at this point, we had built, like, a tiny factory on Cape Cod. I mean, there was a lot of things going on, but none of it was working financially. So, this factory down in Georgia was going to be a much better solution for us.

42:18But in exchange, they wanted, like, a small investment, and, I mean, that was great because one of the things I really liked about having a strategic investor versus, like, what my dad had done with Cape Cod potato chips is, you know, strategic investors don't have the same time horizons as, you know, when you bring in, like, a VC-type investment. And so, you know, I looked at them more as a partner that was going to just be this manufacturing solution for us and also potentially help with other things, but not really – you know, they weren't going to put some artificial timeline on us.

42:49And they also had no rights to buy the rest of the business. So, they put in a – they bought a minority share, but they basically said we're not going to buy any more of the business? Well, I wasn't interested in selling them. Like, I didn't want to have to sell them the business. But, you know, what I now realize in hindsight is whenever you take a strategic investment, whether or not you intend to sell them the business, you should expect that to be the outcome. And the earlier you can know that when you're negotiating probably the better, but that was not my thinking at the time.

43:21All right. So, there's that. And you're humming along. You're doing well. You're $8 million in sales, but you've got the cookies. It's around 2008 and what's going on in the business at that time.

Financial Crisis and Loss

43:35So, I don't know if you remember around that time. We were also – the country was heading into a recession. I remember well. Yep. And we realized that the cookies were never going to be a profitable part of our business. It was $2 million of our sales, but the right thing to do was to discontinue them. Yeah. But I struggled with it a lot because it was a product that was very personal to me. We had just launched this line of organic mini sandwich cookies with the Jane Goodall Institute, and they all had these endangered animals on them, and the money was going to the Jane Goodall Institute.

44:12And on the front of the package was a depiction of, like, my dad and my two sons. And, I mean, it was, like, the most personal product I think I've ever created. And then right at this time, we're sort of contemplating all of these things about our future and what do we stand for and who do we want to be. My dad got diagnosed with a terminal cancer. And it was just this moment where – I mean, the business was working, but not working great. We had to discontinue $2 million of our $8 million, basically.

44:43And we also had to figure out what we really wanted to be, and my dad was dying. Wow. So, I mean, you know, one of the things I think is really important for entrepreneurs, or at least it has been for me, is that I think even in, like, the darkest days of everything that's ever happened to me, there was never a moment where I even contemplated failure. Like, it just – it never crossed my mind that that was a possibility.

45:14And, I mean, it was extremely stressful. For example, you know, we had now had two kids at the time. My husband and I are working together. My dad's dying. And the business is – I mean, I would say it's doing okay. Now, in March of that year, 2009, my dad passed away. And I remember being at his wake, and some of the individual investors we had, not the strategic, they were actually wonderful. But the individuals that we had tried to organize a shareholders meeting at my dad's wake.

45:48And, you know, that, like, basically, could I run this company without him? Oh, because they had invested money. Because of my dad. Because of him. Yeah. And how much total did they put in? I mean, not very much. I mean, I think most of these people were, like, less than $100,000 of – I mean, which – hey, anyone who invests money, it's important, and it's meaningful, and I'm grateful for it. But it wasn't, you know, a significant investment. But they had tried to organize this shareholders meeting at my dad's wake. And I remember just thinking, like, it was a very stunning moment.

46:20And then three weeks after that, I got a letter from – so we had a large equipment loan for – when we did this deal with the strategic, we had to buy a bunch of equipment for their facility. So we had this large equipment loan, and at the time, you know, interest rates were so low that most banks were, like, kind of upside down in some of these. And we had a death of a member clause in our loan agreement, and we were an LLC, and my dad was a member. So they used his death to put our loan in default.

46:52They basically – because he died, there was a clause that allowed them to call that loan. Correct. How much was the loan? It was, like, a $3.5 million loan. And how much time did you have to give them the money? Well, the letter gave me, like – I can't even remember, like, 30 or 60 days to cure this default. So, obviously, incurable. Wow. And, I mean, I tell everyone I talk to, like, if you get debt, get key man insurance. Key man insurance is when a member of the executive team, whatever, dies, then you can use that money from the insurance policy to pay off any loans or – yeah.

47:30Or just even, like, if it's going to cause major business disruption. You know, it's just helpful to – so, I mean, and I think the thing is, in addition to always believing that things are going to work out, the idea that someone could die had never – I mean, that's just not something you contemplate. And even my dad facing a terminal diagnosis of pancreatic cancer, I don't think fully believed he was going to die. And, I mean, he was in his 50s, right? Well, he was 60 when he was diagnosed and 61 when he passed. He was a young guy. Yeah, he was very young. And I remember, honestly, as he was dying, one of the last things he told me to do was to go to that trade show where we had launched our products.

48:07It was coming up the weekend that he passed away. And he goes, you've got to promise me you're going to go. And I remember saying, OK, Dad, I'll go. But I obviously wasn't – I was never going to leave. I mean, he was dying. I didn't want to be in a trade show when that happened. Yeah.

48:25So, you had – you're basically an $8 million business. You give up $2 million of your sales because it's cookies and it's not going to work. So, you're going to become a $6 million business temporarily. But then you get a $3.5 million loan that's being called in. You've got to come up with the cash in 30 days. Yeah. I mean, it was a terrible time. I mean, it was just a terrible time. And, you know, again, we were discontinuing these cookies. We hadn't done it yet, by the way. So, we still had the sales. We hadn't done the discontinuation. It was just – we were going to do it.

48:55So, we were planning to discontinue these products and, you know, but now we had this new problem of having to replace this debt. Oh, and I also would just like to point out that during my dad's wake, my youngest son nearly died because we found out that he had a life-threatening peanut allergy. Wow. And so, our number one product at the time was a peanut butter cracker. And once I came out of like the fog of the wake and, you know, I mean, just everything and we're sitting there and my husband and I are looking at each other and, you know,

49:26I think – I mean, we just like rolled up our sleeves and went back to the office and said, what's next for us? And I remember like gathering the team around and, you know, I'm just – I remember telling everybody that we're going to make it. It's going to be great. Just trust me. How many people at that point did you have working for you in 2009? Probably like 12. And I'm thinking – I mean, optimism is great, but like I'm thinking if you're being transparent with me and you're telling me what's going on, I'm thinking we're not

49:58going to make it. We are not going to survive this. Three and a half million dollars? I mean, you've got 30 days? There was a couple of things that could have happened. I could have lost control of the company. I could have sold more to investors. I could have, you know, stepped down. I mean, there was a lot of things I could have done to save the business that I didn't want to do. But what I really wanted to do was just find someone to take on this debt. But it's the height of the recession. Nobody's giving any money. No one – nobody. I mean, here in the Bay Area, like VCs just like – if they were lucky and they were still

50:28in business, they were – nobody was writing checks. No. So, like I managed to convince the bank to give us more time. That was the first thing I did. I was like, listen. I was like, we're a viable business. The best thing that you can do is let us get the money for you. And then I'm at a trade show. Again, actually, the same trade show where we launched our business. The Expo East in Baltimore, huh? And I was giving a presentation to – I can't even remember what the panel was, but they asked me to speak on a panel.

50:59And I'm thinking, like, you know, I had nothing valuable to tell anybody at this point. But I remember thinking, here's my chance to just tell our story and maybe someone will hear it and want to help us. Oh, so later that day, I was actually supposed to talk to Meg Hirshberg, who is the wife of Gary Hirshberg, who started Stony Field Farms. Oh, Stony Field, sure. Yeah. And she was – she, in and of her own right, is a very accomplished business writer who was writing for Inc. Magazine at the time. And she had reached out about doing this interview and, you know, was thrilled to do

51:30it because obviously the chance to get an Inc. Magazine could be very helpful for our brand. And halfway through me telling the story, she's like, hold on a second. So she actually calls Gary on the phone and she's like, you have to meet this person I just met. And Gary decided to invest in us at this time. Wait, let me just – let me just get this straight. You're talking to somebody who's writing an article for Inc. Magazine and you're telling them that you are in dire financial straits? I mean, I'm telling them the good parts of the business too. Well, you said, well, now we're in this situation where we owe the bank – it's

52:03just odd because – it's unusual because normally people would not say that if they're trying to get a good article written about them. They would just try to not – Well, I – like in – knowing I was meeting Meg that day, I read some of the stuff she'd written. And if you read about the early days of Stonyfield – Oh, I know all about it. It was a failure after failure. Gary was on the show eight years ago. Yeah. So, I mean, I felt like I was talking to a sympathetic ear even though it was Inc. Magazine and all those things. But – Okay. So, a couple of things happened as a result of this.

52:34I also get introduced to a new type of bank based in San Francisco called RSF Finance, which was funding mission-driven, socially responsible businesses in Waldorf schools. So, I met with the RSF Finance and they agreed that they would in fact take over our debt. So, they – it was a loan. It was not an investment. It was an equity investment. It was a loan. I want to break this down because you get the loan and you can refinance the company, right,

53:04and the debt. And you're going to shed the cookies. We know that. But you're still Cracker's company. Correct. So, part of what I always wanted was to be a snack company. Right. And, you know, my husband and I had been wanting to get into other snacks for quite some time and my dad was really discouraging it because even though crackers didn't have the same turns as potato chips, you also didn't have the same complications. And I always feel like there's two ways to be successful. You can be a big part of a small category or you have to be a smaller part of an enormous category.

53:38And, you know, I think my dad was more satisfied staying in the big part of a small category. I don't think he was enthusiastic about jumping back into the snack, you know, world again with something even more competitive. But that was sort of kind of I think what my vision had always been. And now that with the sun with a peanut allergy, I also wanted products that were like more inclusive. Like I really felt strongly that I wanted products that were delicious, organic, but also that almost anybody could eat.

54:09And one of the few things that we could come up with that all of those different categories were tortilla chips because they're naturally gluten-free. They naturally don't have nuts in them. They're healthier in the way we made them. They're, you know, they had multigrain ingredients. They had all these cool inclusions, chia seeds. And so that was what we kind of envisioned. But I just want to – sorry, I want to go back for a sec because I get it. You're going to make healthier tortilla chips. But now you're in, you know, six years in and, you know, the crackers are growing not as quickly as you wanted.

54:45So I'm trying to understand why you start to think about tortilla chips because you're looking at this category and you're saying this is actually going to give us a better opportunity to grow or because it's a Hail Mary or because something else. I think it was a combination of all of those things. So we basically left 2009 with a new bank, new investor, a new lease on life, but we still didn't have that, like, hit product that we needed.

55:15And, you know, the tortilla chips just hit all of the marks that we wanted. And it was one of those things that if it didn't work, the company for sure would have failed because we were discontinuing $2 million. We, you know, we were going to put a lot into this new launch. So, I mean, I guess in a way it was a Hail Mary. I mean, I don't think I necessarily looked at it that way, but in reality it was. And I think what was so interesting, like, as I reflect on it right now was I remember for the first time it was the product that, like, I think I had been wanting to make my whole life.

55:51You know, it's like I feel like everything about what I had done sort of brought me to this moment because it was really the thing I wanted as a kid. And was that a challenging product to make or was it actually fairly easy to do? Well, it's not a challenging product to make exactly. But also now we were still making most of our products down in Georgia at that factory. And my husband was going down there, like, weeks and weeks and weeks at a time.

56:21And our kids are, you know, little. We're still not making salaries. I mean, like, everything was kind of bad. Right. And Gary gave us this great piece of advice and he asked us, like, what is the single thing that is hurting your lives the most? Like, what is making your life, like, untenable right now? And, you know, I said, honestly, my husband being gone, like, him not being able to be in the office, because we didn't have anyone to help us with the kids either. So we were just sort of, like, the kids were either at the office with us, they were in school, like, we were sharing duties.

56:57Like, we never traveled at the same time so that someone was always home with the kids. But we always felt like anything that would make our lives better was, like, a luxury we couldn't afford. And Gary's advice that that isn't a luxury. Like, you being present fully to run this business is what this business needs. So we hired a manufacturing person to take over that role, and we were able to get that product line off the ground in 2010. Yeah. But the tortilla chips, like, again, it's like it covers the gluten-free and the peanut-free and allergen-free, and it's going to be the best sort of healthiest option in that kind of snack aisle.

57:38But this is a different part of the snack aisle. I mean, when you do that, like, you've got late July as a cracker brand. Is it fairly easy to just call up the stores and say, hey, we've got tortilla chips. Can you just slot them into the chip aisle? No, it's very hard. It's a completely different part of the store. Sometimes it's different buyers. I mean, and usually it's very difficult for a brand to go into two different categories like that. I mean, I think the odds on us doing it were slim.

58:09And I think most people thought we couldn't do it. In fact, one of our salespeople came back, and he said that he overheard another salesperson that had actually worked for my dad at one point talking to our buyer to saying, like, oh, that company is never going to make it. You know, Nicole's running it. It's over for them. And obviously I was pretty angry about that. But I was used to people not – people underestimated me throughout this entire exercise, so that was not a new phenomenon.

58:46But I was just very disappointed that this person who I thought was kind of a friend to my dad and a friend adjacently to me would do something that hurtful was just – you know, realized that that was probably what people were saying out in the market. Did that in some ways motivate you? Did that create like a fuel that, you know, where you're like, I'll show them? Or was it more like I'm really hurt by this? Well, I can tell you I picked up the phone and called him. I said, hey.

59:17I, you know, I said, if you have thoughts and you want to discuss, you know, the future of our company, feel free to call me anytime and we can hash it out. But I'd really appreciate it while we're trying to, you know, save this business if you would stop going around town and saying that. I said, it's just not – it's not the right thing to do. And, I mean, he was mortified. But it was – you know, I think it absolutely motivated me. But I think, honestly, at this point I was also just pretty focused on just making the business survive more than – like I called him because I wanted him to stop telling our customers this information, not because I wanted him to, you know – like I really felt like people going around and saying that was just bad for business.

59:57Yeah. How long – I mean, I'm thinking tortilla chips, especially if, you know, you've got a co-manufacturer. And, again, correct me if I'm wrong, but I'm thinking they're not that complicated. You've got corn. You're grinding them into tortillas. You're then cutting them up and then frying them. And you are using presumably organic corn. What was it – did it take that long? I mean, how long did it take for you to come up with a prototype that was great, that was good enough for you? It did. I mean, it took us quite a while to develop, you know, what ultimately would become this product.

1:00:28I mean, it wasn't something that we did overnight. Plus, we did some seasonings on them, which were very complicated. And, you know, it was a pretty tricky line. And so a couple things occurred at the same time. So Whole Foods decided – they said that they would give us a chance. But they launched us at the exact same time as Kettle decided to get into the tortilla chip business with a brand called Tia's. So Whole Foods launched us at the same time, but they gave Tia's all of the displays, not us.

1:00:58So they were outselling us pretty significantly. Then, separately, we realized for conventional stores, you needed this totally different form of distribution, which we didn't have. So I got a distributor to agree to distribute us if we could get into Stop and Shop. And Stop and Shop is mainly New England, I think, right? Yes. Yeah. Okay. Yeah. And I also just want to mention one other thing. Yeah. I had never really done a lot of sales at this point because I was kind of nervous about doing my own sales. But for this product line, I really felt like – You were doing operations mainly.

1:01:28Marketing and marketing. Yeah. Marketing. Finance. Yeah, exactly. Your dad had been doing a lot of the sales or other people? My dad and other people. And my dad was so good at it. He just was a great salesperson. And I think because of that, it just wasn't something that I needed to do. And I also didn't feel like I would be very good at it. I'm kind of shy. I'd never really done it. So I got an appointment to go to Stop and Shop. And this is my first real big like make or break sales call too because I really needed them to say yes because without them I couldn't get the right distribution and we wouldn't be able to get this whole other type of sales.

1:02:09So I went down there and I remember I was super nervous because, I mean, essentially this is our Hail Mary. This, you know, switching into tortilla chips was pretty make or break. And I really needed this customer because without it, you know, we weren't going to have enough business to keep the line going. And I, you know, I'm never great about sticking to presentations. I always sort of drift or tell my own stories. But I was so nervous like I actually read the presentation in this meeting because I didn't want to screw it up.

1:02:41And I got it to the end and I realized I hadn't been listening very much, which is probably the most important thing you're doing when you're in sales is listening. But I was too nervous. So I got to the end and I was just staring at the buyer and he's looking at me and he said, is there anything else, you know, that you have to ask or say? I was like, well, there's one thing I'd really like to know if you're going to say yes, because if there's any way you could tell me right now, it would like change our business in such a fundamental way that I'd be grateful for the rest of my life.

1:03:16So if there's any way at all, you can say yes. And he looked at me and he said yes, which I mean, I've been on a thousand sales calls since and that has never happened. That never happens. He said yes. And I remember thinking I should get out of this room as quickly as possible before I screw this up in any way. So I thanked him and I left and I called the distributor and I said, Stop the Shop said yes. And they agreed to take on the product. And basically that was the moment that made us the overnight success, you know, seven years in the making.

1:03:48When we come back in just a moment, late July succeeds to the point where Nicole has to say goodbye to it. Stay with us. I'm Guy Raz and you're listening to How I Built This.

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1:06:29I'm Guy Raz.

Organic Tortilla Chips Take Off

1:06:30So it's 2010, seven years after launch, and late July finally has a hit product, organic tortilla chips. I think our products tasted excellent, and there wasn't a lot else available that was excellent, organic, healthy. That just wasn't something that other people were really focused on. And I do think it was a little bit of the right product at the right time. I mean, you've gone from like, you know, 8 million sales, barely hanging on,

1:07:06on track to within three years to get to $100 million. I mean, it was honestly, I think the thing is that because I was probably optimistically delusional during the low period, I felt like we were always going to get there. So I don't think I was as floored by our success as I probably should have been. But all of a sudden, we could afford things. We were able to hire the people that we needed. You know, we were growing like we had never grown before.

1:07:37Yeah. Were you surprised at how quickly that happened? I mean, you know, the other thing that I've realized now in hindsight is there does, like a brand does get a little bit of a critical mass once they reach a certain size. I mean, it's not like success lifts all boats, but it kind of does. You know what I mean? It's like all of a sudden, people are seeing you in more places. Your brand just starts to have more relevance. And I remember one of our kind of proudest moments. We were now launching new lines of tortilla chips and other types of products. And at one point, we won a taste test for one of our products over Tostitos.

1:08:12And I mean, this is what I had wanted to do since I was a little kid, basically create these products that tasted better than conventional so that people who want to eat natural and organically aren't sacrificing anything. And they can have the exact same stuff that you can get from conventional products. And I finally felt I had done it. How with that like rapid expansion and growth, you had to hire more people. You had to really build this out quickly. How, I mean, you know, by the time you had $100 million in sales, I think around 2014, 2015, how many people are working for late July?

1:08:47You know, we were still pretty lean. I mean, we only ever had about 27 people. Wow. Wow. So you did not own, it wasn't vertically integrated. You didn't own your factories. You didn't own assets. But it was the brand that was valuable. It wasn't the means of production that mattered. No, it was the brand. I mean, the one thing that I know about building a brand is starting is not really the hard part. And even getting to a million dollars isn't really the hard part. It's really getting from like $10 million to $50 million is probably the hardest part.

1:09:20And then, you know, I think after that, it's hard for different reasons. But $50 to $100 is actually quite a bit easier than $10 to $50. Okay, so you are, I mean, you really land on a great product and it is taking off.

Partnership and Acquisition by Campbell's

1:09:38And by 2014, Snyder's Lance, which had invested about 19%, they owned about 19% of the business, they increased their ownership to 80%. Tell me the story because from what I heard you talk about earlier, it sounds like this was not ideal. So, and this is something that I think, you know, all entrepreneurs probably can relate to, is we had a lot of individual investors, including my mother, that had been with us since the beginning. Yeah.

1:10:09And I think when you sign up to be an entrepreneur, you sign up. You don't necessarily get to bring those other people along with you. And that includes your family and friends or any early angel investors you have. You know, you have to be realistic about, even though you might be willing to do it for life, they're not necessarily going to be willing to do it for life. And so there was an opportunity for them to get some money back from their investment. Correct. And so it was a really, really tough decision for me.

1:10:39And it was sort of like all the times where I judged my father for selling his business or doing all these things, it was like it was all coming back at me, you know, and recognizing it from the other side and realizing that you just have to make decisions and they aren't always what necessarily would have been your first choice. But, you know, my mom now was a, I mean, she was actually 59 when my dad died. She was a widow. She was not feeling as financially secure as she wanted to feel at this point. And this was an opportunity to give her financial freedom for the rest of her life.

1:11:16And here you have an opportunity to make good on those early investors. But they're going to take 80 percent of the business, right? Right. And so it's a tricky balance because on the one hand, you know, what do you do? On the other hand, it's a good outcome for a lot of people. You probably were going to get some money to take some money off the table. But again, you knew that at this point you were going to be working for them. Exactly. That is true. And I think whenever you take an investor in, you know, you have to recognize that if you take someone's money,

1:11:50that becomes part of the equation. And you can't separate that from, you know, your business and recognizing that you've made that choice. But this is where, again, Gary Hirshberg was a great mentor to us. And he helped us structure a deal that still effectively gave us control of the board, which allowed us to really still control our destiny. And at this point, we were profitable. You know, so like we were a good addition. And as we were negotiating this deal, we did have a little bit of that ability to structure it in a way that still made sense for us.

1:12:26But the way you're talking about it sounds like, I don't know, maybe I'm reading into it, that it was just – it wasn't exactly what you'd hoped for. No, it definitely wasn't. I mean, I could have imagined running late July forever, and I, you know, I don't think I really, really wanted to do this. But I also knew that it was the right thing to do for our investors, particularly my mother. And also people had been with us for a very long time. You know, they rode this roller coaster, and they didn't necessarily know that they were going to get on to this type of a roller coaster.

1:12:59All right. So you now – you remain as the CEO, but you now have a sort of a bigger – More significant partner, yes. More significant partner. And as often happens with food companies and America, the big fish eats a small fish. And, you know, a lot of brands that, like, we grew up with are now owned by Mondelez or Unilever or whatever. And that's just the way it is. Campbell's, of the Campbell's Soup Company, owns many different brands.

1:13:31They acquire Snyder Lance in 2018. And I'm assuming at that moment, late July basically becomes part of the Campbell's family of brands. Well, we were hoping that that was not going to necessarily be the case. We did have a clause in our agreement that allowed us to buy it back in the event that Snyder's sold. Yeah. But apparently they didn't sell. They merged.

1:14:02I see. So it was a merge or it wasn't a sale. Correct. I mean, this is just a great reminder of, like, how contractual language is so critical because we all – all of us would have looked at it and be like, great, we're protected. There's a couple of lessons here. I mean, the one lesson is that I think when a bigger company wants something, you know, you as a small company, they're going to get it. They're going to get it. And that's ultimately what we decided was, you know, we could fight it. We could – but in the end, we realized we wouldn't probably win what we wanted.

1:14:34And you'd lose a lot of money fighting it. And we'd lose a lot of money. And also, you know, I really love Late July. It is a brand that is everything I wanted it to be. It stands for everything I wanted it to stand for. And, you know, I didn't want to destroy that. And I didn't want to fight with it. And I didn't want to send it off into the universe, you know, in this very negative way. I don't really want to spend years in litigation. That's not something that interests me. No, it's not fun. It's not good for your health. No, it's not good for anything. And, you know, honestly, the brand is still doing great.

1:15:08You know, they've protected it. They're growing it. It's still, you know, a strong part of their portfolio. And I'm very, very proud of that. Yeah. I mean, it makes sense. And I mean, obviously, that's the business end of things. But I'm wondering on a more personal level, like, like after 15 years of working on this brand, what was it like for you to say goodbye to it? So what's really interesting is so every year, one of the things that we did as a brand is sponsor the Newport Folk Festival in Newport, Rhode Island. My parents had met there in the 60s.

1:15:40And like as the sale was occurring, this was like our last big thing. And I remember, like, we're backstage at this little stage. And it was also my birthday. So here I am. It's like the end of July, late July. We just sold this business. And my team shows up with like a birthday thing for me and candles. And it was like all decorated. And I just remember sitting in like the enormity of that moment and know that, you know, this is the end of this chapter of my life.

1:16:1315 years of doing this business. And this moment is really the end. It was really heavy. And I felt pretty sad. Yeah. Going back to that acquisition, though, in 2018, or merger, right, when now this brand becomes part of Campbell's, on the one hand, I imagine now this really is where you get a nice payday. And people make assumptions, right, about, well, you know, you sold this business.

1:16:47You made a bunch of money. What a great outcome. And so the assumption is like this is only great. This is only awesome. Well, you know, it's interesting, Guy, that everyone had been making that assumption about me already. Like people assumed when my dad sold Cape Cod chips that I had a lot of money. People assumed when my dad died that I got a lot of money. I think people just made assumptions about me and how much money I had and how, you know, just I think my whole life. And also, you know, I mean, you alluded to it earlier in our conversation. And even though I know that late July was successful because of me and my husband and what we did and the choices we made, I don't think people really thought that was true.

1:17:29You know, I think there's always that, you know, it's her dad. And that's fine. But I don't think that, you know, people really attributed it to me per se.

1:17:41But mostly the fact that, you know, I still feel like there was a lot of work left to do in the supermarket. And but that was it. You were out of late July. And so you knew already you were going to start something else.

Starting Nixie Beverage Company

1:17:56Yeah. So I knew that I was going to start something else. You know, I was still pretty young. I wasn't really ready to retire. And, you know, one of the things that you do with snacks a lot is you display with drinks. So the whole time we were doing the tortilla chips, we were always doing cross displays with beverage brands. And you know what we were almost never doing? Displaying with other organic beverage brands. Besides Honest Tea, the whole beverage aisle was just filled with plastic, filled with sugar.

1:18:27And, you know, the mission that we brought into the late July was you just really couldn't find it in the beverage aisle in the same way. But there were organic drinks by 2019, 2018. There was Honest Tea. There was Honest Tea. There was juice. Yeah. But if you look at, like, the number one selling products, there really wasn't. Like sparkling water, sodas. I mean, that whole section was not. All right. Let me ask you about this because you want to make an organic sparkling water beverage.

1:19:00And we had Spindrift on the show years ago. And so I know that's a different kind of product because they are using fruit juice and they have some kind of proprietary process that enables them to make it shelf stable. Many of the, you know, the sparkling water brands use something called, like, natural flavorings, which is tricky because in some cases you need to use chemicals to extract the flavor from fruits. You were going to use a different process, right? You were going to use a different way to flavor the beverage. Well, we're just using organic flavors.

1:19:32So basically you're taking organic ingredients and extracting them through organically approved methods. And then, you know, you add them to the filtered water. And you basically just can't use the chemicals that you would use in a natural flavor. Like you can't use, like, hexane and those type of gas type chemicals to get the flavors out. And so, you know, I think what's nice about organic flavors is that, you know, you basically know what's not in it. But, I mean, one of the things that I've learned about being in the organic food business over these years is that I'm very passionate about it and I care a lot about organic.

1:20:10But, you know, I don't think the average consumer cares nearly as much as I do about organic flavors and their sparkling water. Yeah. Before I forget, so you start this brand called Nixie. And Nixie, just briefly tell me the name, the story behind the name. Sure. So I started Nixie Beverage Company. So Nixie is another name for my nickname, which is Nicky. And also it's the, you know, the Norse sort of mermaid mythical creature, which, you know, alludes to, you know, my connection to water and the cape and the fact that we are a water-based product.

1:20:44Right. Right. And did you, in terms of like starting this business and funding it and figuring out how to structure it, I imagine, because you learned so many lessons from your previous two companies, what was going to be different? Were you going to self-finance this? Were you going to have completely different terms for investors? What were some of the things that, because of your previous experience, how did you approach this brand differently? Well, we were funding it ourselves. So that is number one. That gave you a lot more freedom to do what you want to do.

1:21:15I think what's important about that, I mean, what I think is the most important thing before you bring in any kind of investor is that you know your products. You know your best-selling products. You know you understand your velocity. Like you know exactly what your product potential is. And so funding that beginning ourselves allowed us to learn a lot about our products before we had to even think about the idea of investors. The unfortunate thing that happened is just after we hit stores, of course, if you know the timeline, we are now heading into the winter of 2020.

1:21:48And part of, I think, what our real strength is, is retail strategy. But just as we were hitting stores and getting a lot of traction, the brand was doing really well, COVID hit. And, I mean, that just radically changed our business overnight. Because, you know, obviously, if you didn't know about us before COVID, it was going to be very difficult to learn about us during COVID. Yeah. For obvious reasons. Yeah. But it turns out that somehow people did discover this during COVID, right?

1:22:21Like, I mean, you expected, I imagine you expected this to be a disastrous year, but it was okay. We did expect it to be a disastrous year. And, I mean, there was obviously things that were disasters. But the one thing about COVID was that we were all in it together. So, you know, previously, if something would go wrong, like when, you know, when that bank called my loan, every single person I was competing with didn't have their loan called at the same time. Just I did. And so, during COVID, every single brand on the store shelves, every single brand that you were working with or around or surrounded by was dealing with the exact same problems that you were.

1:22:56Yeah. Tell me a little bit about, I mean, you have started with sparkling water, Nixie, and now you've got sparkling soda. It's all no calories, no sugar, right? Correct. And your sweetener is Stevia. Yep. This is a, I mean, super highly competitive space, right? I mentioned some brands. LaCroix has been around for a long time. It's a big brand. Of course, not organic. And Spindrift is somewhat different because they use fruit juice. But there's like Topo Chico has it. Liquid Death has sparkling beverages. And, you know, Pepsi makes one.

1:23:28I think Bubbly. I mean, I think Coca-Cola got into this with Aha. Like, this is a very competitive space. So tell me what you've been learning over the last five, six years really getting into this space. Well, what, I mean, first of all, again, I go back, taste is everything. Like, you know, with any product you create, people will only buy it a second time because they like the way it tastes. Yeah. The mission is what makes them feel connected to your brand, you know, gives you the loyalty. But the taste is always going to be the most important thing. And, you know, we really focused on taste for our sparkling water.

1:24:01And I think that's how it found its market. We put a little bit more flavor in. We're highly carbonated. And, you know, I think ultimately that's how we found success. Yeah. What do you think your dad would have made of this beverage brand? I mean, it's all over the place. I see it definitely every time I go into Whole Foods. It's a totally different category. I'm sure he would have been upset when I told him I was going to start another company. I'm sure he would have said. I mean, honestly, getting out of a snack business and starting a beverage business is maybe one of the stupidest things that you can do.

1:24:37You went from the second hardest category to the first hardest category in the supermarket. Beverage is the hardest category so far that you've been involved with easily. I would say so. Maybe just because of distribution. Like the sales part is honestly very similar. Like you need similar velocities. You need like the path to success like store wise in terms of sales is very similar. But the means of distribution is so different. But, you know, I wonder, like, what is it that motivates you now?

1:25:08Right. Like you could probably within the next couple of years sell this again and make a bunch of money and maybe start something else or maybe not. Maybe start a foundation. Like I've interviewed hundreds and hundreds of founders on the show and people make decisions for different reasons. Some people just didn't really. They just wanted to retire. They want to golf or they wanted to run a foundation or they wanted to get into philanthropy. Or they want to start their next business or they want to basically work until the day they die. Right. What is it that like gets you going and gets you excited about doing this every day?

1:25:43I mean, first of all, I love food and I love I can't like people go to the grocery store. They buy the products that I make. They bring them to the beach with their friends. They serve them at the dinner table with their family to be a part of that. And so many people's lives, you know, it's just something that is I feel incredibly grateful for. And it motivates me like every single day. I think being able to create a place that is a good place to work is also really important to me. I am very proud of, you know, our employees that have grown with us over the years.

1:26:16We've seen people meet their spouse, have a family, go back to school, come back to join us, like leave to go work at another company and then rejoin us. And, you know, I've watched people grow these incredible careers. You know, we get to give back in a way that that is very meaningful to us. Like every year we do this program that we started at late July where every single one of our employees gets to pick a charity that's important to them. And either Peter and I will donate personally or if the company can afford it, the company will do it.

1:26:47But, you know, it's just like, I mean, it's pretty much a dream to get to do this. Yeah. What do you, you know, it's, I mean, it's ironic is not the right word, but it's quite amazing that the brand that your dad started and then the brand that you started were eventually now are both portfolio brands under Campbell's. Campbell's, right? I mean, I wonder, first of all, when you look at those brands, Cape Cod and late July, do you feel connected to them?

1:27:21Do you still feel like they are part of you? Do you feel like that's in my past and they're doing their thing and I've moved on? Like when you see it in the store, does it mean anything to you? Well, I will say a lot of times Nixie is displayed with late July, which does give me an enormous amount of joy when I see that. But, you know, honestly, like sometimes I'll just be missing my dad, you know, and I'll think something really good will happen. For anybody who's had a significant loss, like it's always the good times. I think when you, like that's when I want to just call them up and tell them what happened.

1:27:53But, you know, something good will happen and I'll be thinking about them and I'll, you know, I spend a lot of time in grocery stores. People ask me, well, what are your hobbies? And, you know, I would say grocery store visits is probably my number one. And occasionally I'll just walk down and I'll see, you know, Cape Cod chips in late July. And, you know, it just makes me feel close to him, the fact that we just both decided to do similar things with our lives. So, I mean, I do feel very connected to those brands still. And I will be rooting for late July and Cape Cod chips, you know, forever.

1:28:23So, all right, when you think about where this is now and where you've gotten to, I mean, you've got – certainly this business is growing and it sounds like you're going to be doing this for a while because you love it. But when you think about that, you know, and the story that got you here, how much of it do you attribute to luck? I mean, how much do you think has to do with just the grind and the work you put in and what do you think? I mean, I think it's a great question because I think there's so many things that happened to me that were lucky.

1:28:54I mean, obviously, I was born into this family of entrepreneurs that supported me and taught me how to – you know, that this was even a possibility. But I think once you go take that next step and, like, why didn't it fail? That's where the luck starts to fizzle out and the hard work picks up. And in my case, the tenacity and just even in the face of, like, absolute dire circumstances, figuring a way out and, you know, making it work and never giving up.

1:29:26I mean, sure, there's some elements of luck in everything, but you have to be prepared for the sleepless nights and the long hours and the fact that no amount of luck is going to solve all your problems.

1:29:42That's Nicole Bernard-Daz, founder of Late July Snacks and Nixie Beverage Company. By the way, remember Nicole's story about the Newport Folk Festival, how her parents met there back in the 1960s and then years later, Late July, became a sponsor? When Nicole left the company in 2018, she figured that connection was over. Turns out it wasn't because for the past few years, there's been another new sponsor at the festival, Nixie Beverage Company.

1:30:12Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And as always, it's free. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please do sign up for my newsletter at GuyRoz.com or on Substack. This episode was produced by Chris Messini with music composed by Ramtina Rablui. It was edited by Neva Grant with research by Carla Estevez. Our audio engineer was Robert Rodriguez. Our production staff also includes Alex Chung, Casey Herman, J.C. Howard, Sam Paulson, Catherine Seifer, Carrie Thompson, John Isabella, and Elaine Coates.

1:30:50I'm Guy Raz, and you've been listening to How I Built This.

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