99. Bootstrapping a Granola Business for 10 years

Sarah Lanphier - DRIVN Food and Beverage

[00:00:00] Hey everyone. On today's episode, we're going to get into the nitty gritty of running a business and what it takes, and then lessons learned about that. And my guest today is Sarah Lanphier , who founded Nuts About Granola, ran the company for about 10 years and has now transitioned to. Starting Driven Food and Beverage, which is a food and beverage agency focused on sales and operational implementation for brands and code manufacturers.

And what Sarah's now done is taken all of her experience of running her own business and now helps brands by not telling them just what to do, but helps them actually do it and implement it. So Sarah welcome, Thank you. I'm excited to be here. I'd love to start at the beginning. Have you tell me about the business that you started a number of years ago now.

I think back in 2008, that's about granola. Sure. Yeah. So I [00:01:00] started a granola company in 2008. I was a sophomore in college. It was , you know, right around the time where the market was crashing and things were getting crazy. I was getting my business degree and during my time getting my degree, I used all the projects that I was working on to start to develop this company.

You know, with all the turmoil in the marketplace, I turned to my mom. I was like, Hey mom, do you wanna start this granola company? You know, I don't wanna go to grad school and I'm not quite sure what to do. So she's like, yeah, sure. So we started this company you know, as small as possible. We.

Rented a fire hole kitchen. We made the product ourselves. I mean, we did everything ourselves. And we just, you know, sold it in farmer's markets. Just very, very, very small scale. And so did that for a couple of years. Kept it really small. Just really learned cuz I mean, I was just graduated college.

I had no experience in the industry whatsoever. So really just wanted to gain all this information and this knowledge and really about, I wanna say a couple years into the business. So [00:02:00] randomly connected with this yogurt company who was launching this new product that needed granola on top of it.

And it just ended up blossoming into this relationship that really took our company from being a brand and focused on branded sales to getting into manufacturing. So we still kept our brand. We still grew it, you know, our branded products were in Costco. They were in Target they were in Whole Foods.

Couple that was, were pretty much the big national ones that we were. But that wasn't our main business. Our main business was actually private label and co-man manufacturing. And so that's just sort of how we pivoted and we got into that. And then we grew our company we opened up our own facility.

That kind of was a half facility. We really struggled with fundraising. It was still a time where people weren't lending money, you know, let traditional lenders were having, you know, tighter criteria. You know, o other lenders just really weren't giving out that much cash because, you know, their assets had crashed and so it was still a lot of turmoil.

So we ended up kind of pivoting [00:03:00] and we went into, we partnered with a lot of third parties and so we ended up, you know, outsourcing the Canada and it was, we became almost like a middleman type deal. And so after a couple of years of that and, you know, trying to grow and trying to rebrand you know, I just got to the point where, Just the risk was greater than the reward with trying to grow it.

And so I ended up exiting out of the company in 2018 and transferring it to my business partner, who was my mom at the, well, she's still my mom. And so she ended up, we downsized it, so we kind of, you know, just got rid of all the things that we didn't need. Got rid of anything that was national growth or anything really oriented, and we just downsized it to essentially a small independent bakery that she still runs today because it's something that she really enjoys doing.

And there's nothing wrong with that, you know? It's a sustain business. You know, it's still successful today, , so yeah. But I just kind of wanted , to move on and do something different, so. and you running a business bootstrapped is really challenging, especially with fundraising crunch.

And we're in another fundraising crunch right now, and so I see a lot of brands experiencing the same [00:04:00] thing. And so what were some of the things that you did in order to grow the business while still remaining really lean? So, you know, one of the blessings in disguise that I had at starting a company when I was 20 was that I never had a job and I never had a paycheck.

So I never experienced, you know, the time period in which I was working a traditional job. And you know, I was used to getting paid and I was used to a certain lifestyle. I never had that because I never had a job. And so part of that too was the ability to have a lifestyle that was very minimal. So that you didn't need a whole lot in order to make that work.

And so that was a benefit to us to myself at that time. . And then the other benefit was that we were just very strategic about how we grew. It was one of the reasons why we went into private label and co-man manufacturing because it didn't have the costs of being a brand. It didn't have slotting fees.

It didn't have brokerage fees. It didn't have [00:05:00] distribution fees. You made the product, you agreed on a price, it was picked up and that was it. Like that was your sale. So, you know, we were able to diversify in that way so that it wasn't just one sales channel. And then we. Take some of that money that we had during the private label and co manufacturing and invest that into the brand to help us kind of self-fund it and diversify what we were making.

We also just grew a lot slower than what I think some brands grow today. And we just had different goals. You know, our goal was, was sustainable at a certain level, which maybe, you know, isn. It was very regional and not necessarily completely national. When we wanted to grow nationally, it's a little bit where we ran into problems cuz we didn't have enough cash.

So, you know, , it was really based upon the goals and the financial structure that you wanna build that can create a very sustainable business for a long term. It's just may not be. A national business. It may not be a 10 million business, it may just be a 2 million business. And so, but that 2 million business can be a lot more profitable than that [00:06:00] 10 million business depending upon how you structure it.

And as we transitioned to the work that you're doing now, you've taken the stance of wanting to help other food and beverage business kind of avoid the same issues that you went through and had to deal with firsthand. What are the biggest issues that you see founders dealing with on the sales and operations side of their businesses right now?

I think really finding great partners. You know, there's, I know speaking for myself, I had this, you know, in the back of my head I was like, oh, if we have to grow, like we have to fundraise, like we have to get outside capital and cap to fundraise. And you know, I think looking back, I don't necessarily think that was the case.

I think we could have got a little bit more creative in how we did. And we structured some things which, you know, we did in a certain way, but maybe not at the exact moment that we needed to, but, Looking at it in a different way and not saying, oh hey, we have to get money from outside to do this.

It's like, well, how could we do it internally? And maybe we do it on a different way and we do it, you know, smaller scale to build those building blocks, but not so focused on having to have this outside [00:07:00] capital like you have to do this. . And the other piece of that, you know, is the co-man manufacturing is the actual manufacturing piece.

Whether or not brands do it in-house or they outsource it, there's challenges with both. You know, we ended up building our own manufacturing platform because it was part of the service that we were offering, but it's expensive to do both. It's really expensive to be a brand and it's very expensive to.

to build and maintain a manufacturing facility. And they're also very different skillsets. And so part of I, you know, the challenges in today's environment, you know, you have all the supply chain effects of covid. So whether that be ingredients or just partnership, Wine time with co-manufacturers and just that relationship in general.

And then you also on the other end, you know, have all of these pressures from retailers wanting all of these different pricing changes or decreases or not, no increases. And it's really understanding, you know, where does your brand and your business really fit in that environment? And sometimes that means that we're not gonna go into this account because it's just not a great fit for where we are right now.

So, Yeah, I think those are really [00:08:00] challenging things. I think those partnerships are really underestimated. You know, I've been posting a lot recently about my experiences of working with keHe as a national distributor. And then through them, the retailer Glasco, which is owned by Albertsons. And really there's , a lack of a good relationship there with us being a small brand.

And it led to us, you know, selling and initially, but then ultimately like not moving the product off the shelf because we couldn't build a relationship with the retailer to do marketing programs and ended up losing, you know, $8,000 on that partnership. And at the end of the day of working with them for like nine months or a year, we ended up pretty much just breaking even on everything that we did with them.

And essentially it was a huge opportunity cost for, for other things and ended up just exiting that relationship. So I think that's so key of working in this industry or finding the right partners who are really, they're the help you succeed and don't just see you as like a problem of something to deal with later.

Yeah. And also believes in your product. , you [00:09:00] know, you want people to have, you want those advocates for your product because those, you know, those people are gonna help sell your product and they're gonna help advocate it, not only from a buyer level, but also you know, that trickles down and you wanna get buyers excited as well as consumers.

And you know, a lot of times those buyers will recommend a consumers as as what to buy. So as you look at brands kind of getting their product out into the world, I know that's one of the hardest challenges and something that you've. You've kind of built as well and getting into some great retailers. So what was your strategy into like getting the attention of some of the retailers, like the Costco of the world and how do you succeed with, with companies like this?

So we pretty much got almost all of our leads through trade shows. So we did the traditional, you know, four trade shows a year, the two expos, east and west, and the two fancy food shows. And we, we always had success there. But, you know, it takes time, it takes years of vending there. It takes years of building those relationships.

It also [00:10:00] takes. Timing to depend on what that, what that store is looking for. We pivoted in, in the product offerings that we made. We had actually three different lines at the time. We had, you know, a traditional granola and then we had a savory product, and then we also had paleo product.

When that was. You know, it was a few years ago before it was as saturated as it is now, but it was, you know, really trying to understand what are the trends and what are the, the buyers really looking for? What's different that's not currently in the marketplace? What are consumers needing? What are they wanting?

I know right now, , there's a lot of you know, buzz around building a product online and building a presence and, you know, selling through your own means, selling through Amazon, really getting the, that sales data, that traction and that consumer piece before you go into retail so that when consumers walk into the store, there is some sort of.

Identification or understanding of what your product is. Cause they may have had it before. And so, and there's, again, there's challenges with that too. You know, every single channel and strategy you know, has its own challenges, but it also can be [00:11:00] a great strategy. So it's really understanding the cost, the expense of getting into those retailers, what it takes to be successful.

It's a lot easier to get into the retailer than it is to stay in the retailer. . And so, you know, not so focused on, oh, hey, we landed this account, but are we gonna stay in this account? And understanding how that, works in your strategy and your budget because it's expensive to be in those accounts and to be successful.

So, Let's talk about what it took to actually find that success in retailers. Did you find a strategy of, maybe it was a mix of like trade spin and promotions or demos or awareness building, like with those retailers? Anything that you that you learned over time that you needed to do differently?

So we found more of our success on the private level manufacturing side than we did on the retail side, mainly because that's where our focus was. And by the time we got ourselves together on the branded side. So we kind of put our brand to the back burner for like of almost five [00:12:00] years as we were growing our manufacturing side.

And by the time, which is part of the reason why we rebranded , by the time we got back to it, there was not a need for granola anymore. There's not a buyer that was gonna talk to me about, you know, selling granola because they had an entire aisle, you know, filled of pro, they just didn't need anymore.

And so by the time we got to that point, I was like, all right, well if we wanna go back into retailer, we wanna go back into kind of building that up. Then we have to do a rebrand and a pivot that will allow us to actually launch items. That are not granola, which I couldn't do under nuts about granola.

Well, , we could, but I don't know the consumers would get it. And so that's why we rebranded the Sarah Snacks. And part of that, you know, and, and I write about this , in the story that I posted, which if anybody wants to read it, I'm sure you can have a link, which goes into a lot more details about some of these things.

But part of that rebranding was the first time we were gonna bring in equity. Cause we knew, I mean, you know, when you were just growing a brand from scratch , we didn't have the capital that we needed to get it to the point where we really wanted [00:13:00] to, it was a next phase than where we were.

And , so we ended up, maybe that deal ended up falling through, which , kind of like sparked the pivot of saying, Hey, like , this is sort of the end of the road for me., but from a retail standpoint, we just didn't focus on it as much as we focused on private label. Including.

Well, that's totally fair. And I think I, when I launched my brand into retail, we had a lot of challenges in that channel as well, just because we realized how expensive it was. I think for a different reason. I think I wanna get into this and the challenges of launching a granola brand, but for my case, we had a product that was so unique that people didn't know what it was, and so required a ton of education.

Mm-hmm. And we've had customers tell us, they walked away. They're like, oh, I thought it was interesting, but I didn't really get what it was, so I didn't buy it.. Right. And like it's really, really challenging on the other side. And so what advice would you give to someone who has a granola company and is launching one now on the Watchouts and then maybe where some of the opportunities are?

So I would say, I mean, you have to have some extremely unique twists to the product. You know some benefit. You [00:14:00] know what? Adaptogens, probiotics you know, interesting ingredients. It's probably not made from grains. You know, it's just some something that takes it out of this commodity space of cereal, cuz that's, you know, really what it is.

And or there's a lot of opportunity for. Fresh product. So that's actually, you know, when we first started this concept of what we're gonna start this granola company, you know, we envisioned like having like cafes, like you, like we're selling donuts. But it was like all granola. And, but it was made fresh because, you know, granola just like any other baked good, you know, the fresher it is, the better it's gonna be.

You know, when you're toasting any sort of anything that has oils in it. So that's the grains and the nuts, like it brings out the flavor and. It's a totally different product than slapping it, putting it into a bag and saying that it's going to be completely fine a year later is not gonna kill you, but it's definitely not going to be as good as when you made it, you know, a week ago.

And so there was just that concept of the [00:15:00] experience where it's a really fresh product that's turning over, but that, you know, having a bunch of sources is definitely. It wasn't the route that we ended up going, but there's some unique factor to the product that isn't making it a commodity, but it's truly a different experience for the customer.

Or at least they view it as that way. No, I think that's a great advice. On the operations side, you've worked as kind of a. Self manufacture for yourself, and then also a co-manufacturer for others. What advice would you give for brands who are looking to launch a product in terms of if they should self manuf manufacture, work with a co-manufacturer, and then how they should approach that relationship?

So there's a couple of different thought process there. You know, once you get into more established manufacturers, they're going to have higher minimum order quantities because, you know, they've invested in the equipment, they've invested in the infrastructure, and the people, it's expensive to turn those equipment on.

It's expensive to turn it over. So they're gonna want a certain level of minimum order for you to come , [00:16:00] in, you know, in order for them to. Talk to you. So if that's not where you're at or you don't think, and it's very, very different, depending upon what category you're in, the harder it is to make the product usually the bigger the minimum order quantity is.

And so. , it's really kind of weighing, you know, is there a manufacturer out there that has the capabilities? Do they have half the capabilities? Because sometimes you have to integrate into the manufacturer and say, oh, you know, my product needs half of what you do, but the other half is unique. And so then there's a hybrid approach for maybe you help provide that equipment and then they run it and then you make some agreement.

Or maybe your product is super unique, that it makes sense for you to have your own facility, or it makes sense because it's small and you wanna keep it small and you kind of wanna grow it sustainably. And the investment in the infrastructure isn't. Is is within your budget, so it's within something that you can do.

You can run it, you can manage it, [00:17:00] and then you also have the ability to grow the brand, or you decide, hey, I also want to, like, we did wanna use this facility to do private label code manufacturing and also use it for my brand, which is also a strategy that people use as well. So there's, you know, it's just, it's very different and it's very dependent upon everybody's in individual situation.

It's, you know, I think it's super easy to get frustrated with co-manufacturers because those relationships are very complicated. And just, you know, immediately just, you know, wanna just do it all on your own, which, hey, if you can pull it off, like go for it. But, you know, , it's really understanding and managing the cost benefits of trying to do it on your own versus outsourcing it.

Yeah, totally get that. And similarly, I with T Squares, we self manufacture our product and built our facility. At the same time, we kept trying to move with a co-manufacturer because we realized that when you manufacture, it's basically like having two businesses. You have your manufacturing business, and then you have your brand and your sales business.

And a lot of times as you grow, those can kind of split [00:18:00] into being their own organizations. Did you kind of find that was the case as well. . Yep, absolutely. That's exactly how we were. It's again, like the costs and the, you know, the cost of running a manufacturing facility, building it out and running it is expensive.

And a whole, like a certain skillset. And then the cost of growing a brand is also expensive, but, Polar opposite skillset. So is very different divisions inside of the organization that both require their own, you know, set of capital and their own attention. So it's definitely not easy to do both of them at the same time, and especially when you're really small.

So, yeah. And I've talked to a lot of Founders who self manufacture, and a few of them are starting to do private label work now just to bring additional cash for the business. Cause there's an opportunity there. And to leverage those assets fully. So tons of opportunity on that side too. Sarah, thanks so much for being on today and I'm excited for the work that you're gonna be doing and helping brands kind of tackle some of these challenge areas in their business [00:19:00] and finding success.

Awesome. I appreciate it. Thank you.