A Small Player Breaks Into Starbucks

The New York Times

On July 1st, The New York Times featured KIND’s new relationship with Starbucks  as part of their shift toward healthier, natural food offerings. Look for KIND at a Starbucks near you.

Daniel Lubetzky, a social entrepreneur who has started several food ventures, always hoped to sell his company’s KIND Fruit + Nut Bars in Starbucks Coffee stores — a chain whose values and consumers he felt meshed with his own. So in the five years since starting KIND, he took every opportunity to introduce himself to Starbucks executives, promoting his company’s success in e-mail messages to them and sending them samples of his bars.

The executives, he says, “were always very polite,” but they never bought the bars. Until now.

On Tuesday, Starbucks began selling three flavors of KIND bars at its registers as part of a campaign to revamp its menu with more healthful fare. The bars, with flavors like Mango Macadamia, are combinations of dried fruits and nuts bound together by honey. They are made, the company says, with whole natural ingredients rather than paste, and they are selling for $1.95 at Starbucks.

“This is such a huge break,” says Mr. Lubetzky, whose company generated about $15 million in revenue last year. “Now we just have to show we can make it work.”

Many entrepreneurs dream of placing their products with major retailers. But it can be a tough sell for small companies without a well-known brand name.

“The primary motivation of any big retailer is to get more dollars per square foot,” says H. David Hennessey, a marketing professor at Babson College in Wellesley, Mass. “You have to show them very clearly and effectively how you can achieve that for them.”

Big product makers have a clear advantage, Professor Hennessey says, because they can usually offer multiple product lines at lower prices and already have inventory management systems in place. Smaller companies must compete on price with major brands, but also be unusual enough to make them worth the retailer’s investment.

Just getting that first meeting can be a challenge. In 2003, Tom Szaky, co-founder of a start-up, TerraCycle, which sells fertilizer made from worm excrement, dialed up Wal-Mart’s fertilizer buyer every day for three weeks straight until the buyer finally answered his phone.

Knowing he had just a few seconds to win him over, he told the buyer he had developed an ecologically friendly fertilizer that is cheaper to produce than the major brands. Intrigued, the buyer invited him to Wal-Mart headquarters in Bentonville, Ark., where the buyer agreed to give TerraCycle a shot.

But breaking into the big leagues does not come without risk. Some retailers demand that new suppliers redesign their packaging and change how they handle shipping and inventory, even while facing the risk that their product could be pulled at any time.

Jamie Bird of Grand Rapids, Mich., was contacted by Target after her Wet Happened? diaper bags were featured on a blog for parents in the summer of 2007. A buyer for the chain invited Ms. Bird — who had been hand-sewing the bags from her basement — to join Target’s Parent Inventors program, which gives products made by and for parents a 12-week test run in Target stores.

Ms. Bird flew to Minneapolis at her own expense for a one-day orientation program. Among the many required steps, Ms. Bird was told to design new packaging for her bags, find a manufacturer, contract with a warehouse that used Target’s specified electronic inventory system, and buy a $5 million insurance policy with liability coverage. Ms. Bird estimates she spent $22,000 to get ready for the Parent Inventors program before Target placed its first order.

“They have all these hoops you have to jump through just to start selling,” she said. “I was getting sick just thinking about how much I was spending and worrying that my bags wouldn’t sell.” Ms. Bird says the test run worked out well, but she is still waiting to hear whether the retailer will continue selling the bags.

Mr. Lubetzky’s attempts to win over Starbucks took far longer. After first offering KIND bars in 2004, he primarily focused on getting them into natural foods stores, like Whole Foods. His sales team would occasionally call Starbucks buyers to gauge interest, with little success. He gave bars to some mutual friends of Starbucks’s chief executive, Howard Schultz, but says he never heard if Mr. Schultz tried them.

Then, in 2007, Mr. Lubetzky spoke at the World Economic Forum in Davos, Switzerland, about his philanthropic work through his PeaceWorks Foundation, which strives to bring peace to Middle Eastern countries by building commercial food ventures. (Mr. Lubetzky channels 5 percent of the profit from his businesses to the foundation.)

At Davos, he reconnected with a Starbucks director of international business development he had met previously who was also speaking at the forum. They became friends, and when Mr. Lubetzky went to Seattle on other business a few months later, the executive offered to give him a tour of Starbucks headquarters. Mr. Lubetzky used the tour as an opportunity to meet executives and hand out samples of KIND bars.

The visit led to an e-mail correspondence with Starbucks’s food and beverage chief, who complimented the bars, but said Starbucks still was not inclined to sell nutrition bars. She asked him to keep in touch, so he sent her occasional e-mail messages about KIND bars’ publicity and growth. The company sold roughly 15 million bars in 2008, double what it sold in 2007. (It expects sales to double again this year.)

In the fall of 2008, Mr. Lubetzky read in an article that Starbucks was rethinking its food strategies. Seeing an opening, he sent an e-mail message to the executive reminding her of KIND and noting a Yale pilot study indicating that eating two KIND bars a day can help people lose weight. It turned out the executive had left Starbucks, but she put Mr. Lubetzky in touch with yet another former Starbucks executive and social entrepreneur, Peter Thum, who had sold his company, Ethos Water, to Starbucks in 2005.

Mr. Thum helped Mr. Lubetzky arrange a phone call with Starbucks’s global merchandise vice president, Julie Felss Masino. Mr. Lubetzky sent her a PowerPoint presentation with background information about KIND’s philosophy and growth.

To his surprise, Ms. Masino sounded upbeat and said KIND seemed to fit nicely with Starbucks’s new plans. The company is introducing an array of healthier and lighter foods and baked items, including salads, smoothies and fruit muffins. “She said they were changing their strategy and so all of a sudden we fit,” he recalled.

Things moved quickly from there. Starbucks soon agreed to buy more than 500,000 bars for its roughly 7,000 company-owned stores in the United States, and KIND had to figure out how to get its current manufacturers to turn out product quicker. The company is now in the process of building a new manufacturing plant.

The next big challenge will be keeping the bars in Starbucks. Mr. Lubetzky says he is giving free bars to all Starbucks baristas, and he is also considering a promotional program that would give customers a KIND bar from Starbucks when they perform a kind act.

It probably will be several weeks before Mr. Lubetzky knows how his bars are selling, but he visited a Starbucks in Midtown Manhattan on Tuesday, grabbed a chicken sandwich with chipotle and introduced himself to the barista: “She said she’d already sold a few bars.”

Jenny McCabe, a Starbucks spokeswoman, says the company believes KIND is a “wonderful fit” for the company’s new healthy-food campaign, but she offered no assurances: “It’s up to our customers to determine the role KIND bars will play in our stores moving forward.”

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