Staying Private Cost This Founder $60 Million
from September/October 2008
by Bonnie Azab Powell
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That’s how much Gary Erickson had to pay his former partner after he changed his mind about selling Clif Bar, a maker of all-natural munchies. Any regrets? None, he says.
With supermarket aisles crowded with new products touting their naturalness and planet-friendliness, many consumers make a beeline to the familiar brands of longtime do-gooder food companies like Ben & Jerry’s, Odwalla, and Stonyfield Farm. The baby boomers and eco-mamas who pile these groceries in their shopping carts, however, might be surprised to know that they’re made by Big Food. Unilever scooped up the ice-cream duo in 2000, Coca-Cola guzzled the organic juicer in 2001, and Group Danone swallowed 85% of the yogurt producer in 2006. Clif Bar, in contrast, is part of the dwindling group of 16 independent organic- and natural-foods companies with $15 million or more in sales—but it too came close to being gobbled up eight years ago, weeks after Nestlé bought rival PowerBar and Kraft bought Balance Bar.
Gary Erickson, Clif Bar’s co-founder and co-CEO, was about to sell the company for $120 million. At the last minute, he had second thoughts about the freedom he’d be giving up. That freedom came at a price—$60 million, which is what he had to borrow to pay off his erstwhile equal partner and the company’s co-founder, Lisa Thomas, who had wanted the sale to go through.
“Here he was with these two huge competitors, Kraft and Nestlé, and he walks away from this deal with Quaker,” says Bo Burlingham, author of Small Giants: Companies That Choose to Be Great Instead of Big, who identifies the oats company—owner of the Gatorade brand and now part of PepsiCo—as the spurned suitor. (Erickson has never publicly confirmed this.) “Everybody thought he was nuts for trying to compete with those guys.” Phil Howard, an assistant professor at Michigan State University, agrees: Erickson’s decision “made absolutely no sense in strict economic terms.”
But Erickson, 50, had decided he wanted to live by different terms—those that would sustain “our brands, our business, our people, our community, and our planet.” These five bottom lines are highlighted and defined in detail all over company headquarters, in the form of oversize bulletin boards, posters, and volunteer sign-up sheets. Erickson and Kit Crawford, 50—his wife and the co-chair, co-CEO, and only other board member—encourage the 216 people in Clif Bar’s converted Berkeley, California, warehouse to take care not only of themselves but also of bottom lines four and five. There’s a rock-climbing wall, of course. The in-house gym offers free kickboxing lessons, yoga, and personal training; employees get 30 minutes of paid workout time per day. Last year they collectively spent more than 4,000 hours volunteering for organizations such as Habitat for Humanity. The company’s Cool Home, Cool Commute program pays up to $1,000 toward eco-friendly home improvements and will loan $5,000 toward the purchase of a hybrid or biodiesel vehicle. The loan is forgiven after three years of employment.
Clif Bar got its start during a 175-mile bike ride in 1990, when Erickson, a triathlete, couldn’t bear to choke down the last of six PowerBars he’d taken with him for sustenance. The owner (with then-partner Lisa Thomas) of a small Greek pastry shop, he thought he could do better and began experimenting in his mother’s kitchen. When he had something that he and his cycling-friend guinea pigs liked, he named it after his father, Clifford, and took a batch to a bike show. Within months the bars were being sold at bike shops around the country, and retail orders quickly followed. The company still prefers a grassroots marketing strategy to expensive ad campaigns. For Clif Bar and Luna Bar, a low-calorie version aimed at women, Erickson spreads the message with countless giveaways and athletic sponsorships; for example, the company launched a professional women’s mountain-bike team called the Luna Chix. Crawford oversees a female-centric film festival, Lunafest.
The employee benefits and Clif Bar’s good corporate citizenship attract not just loyal workers but also, presumably, loyal customers. A 2007 survey by Cone LLC, a brand consultancy, found that more than two-thirds of American consumers say they take a company’s business practices into account when deciding what to buy.
Clif Bar’s relationships with its workers, customers, and community have helped endow the company with “mojo,” says Bo Burlingham, who devoted a chapter to Clif Bar in his book. “When an individual has charisma,” he explains, “you want to follow him or her. When a business has mojo, you want to buy from it, work for it, wear its T-shirts, whatever. And Clif Bar has it.”
How does that translate to the bottom line? Clif Bar doesn’t disclose sales or profits, but claims to have a 10-year compounded annual growth rate of 23%. Industry estimates put its annual revenues at more than $100 million, three times those of Nestlé’s PowerBar. A 2007 Packaged Facts report on the “sports nutritionals” industry ranks Clif Bar and Luna Nos. 1 and 2 in their crowded market. Clif Shot sports drinks, introduced in 2005, trail Gatorade and Red Bull, though.
In 2004 Erickson handed over the CEO’s reins to the marketing chief who spearheaded the Luna Bar division. But when she resigned after three years, Erickson returned, with his wife as partner. This time, they say, they’re staying in charge. Erickson handles operations and sales, Crawford public and human relations. They share strategic planning and product development, and have been branching out. The Clif Bar Family Winery and Farm, which they launched in 2006, buys organically grown grapes and olives and helps small farms adopt organic methods.
Trying something new, risking failure, is precious to them both, they say. “We have to be like Tiger Woods,” says Erickson. “He’s willing to change his swing in the middle of the best career of any golfer ever. And we’re willing to do that. You have to be able to change.”
But not change that much. “If you don’t have to go public,” Erickson says, “don’t do it. With Sarbanes-Oxley, the freedom you give up isn’t worth it. We would not do well with Wall Street.”
