Insights: Chicago | Business Spotlight | Spring 2018

RXBARs: Huntington provides capital for a growing business

RXBAR built its success with simple ingredients, both in its products and in its business

Peter Rahal, co-founder and CEO, RXBAR
By Erik Cassano

RxBar is a company that gets right to the point. To understand that, just read the label on one of its nutrition bars.

“3 egg whites, 6 almonds, 4 cashews, 2 dates, No B.S.”

Those are the ingredients in the company’s chocolate sea salt protein bar. And it’s not wedged in small type onto the back panel; it’s printed across the front of the wrapper in large type. Many food companies go to great lengths to point out the simplicity of their ingredients. But for RxBar co-founders Peter Rahal and Jared Smith, the straightforward messaging on their packaging reflects how they’ve built their company -- through hard work, miles logged and an unwavering belief in their ability to succeed. Within five years, what began as a basement startup in suburban Chicago has grown into a company the duo sold to Kellogg's in fall 2017 for $600 million.

A better bar

As with many other entrepreneurs, Rahal and Smith launched their business because they were dissatisfied with the existing selection on the market. “We had always been health conscious,” says Rahal, the company’s CEO. “But when we looked at the market, we didn’t see a lot of health and protein foods that were delivering what health-conscious people wanted -- whole-food ingredients, simple recipes, so you know what you're putting into your body.”

Rahal and Smith were aware that health-food consumers are more likely than other consumer to monitor their intake of calories, carbohydrates, fats and protein. And the fewer ingredients they included in their product, the easier it would be for their customers to track the intake of macronutrients.

The pair also understood that health-food consumers are often on the go, whether that is at work, working out, shopping, preparing meals or transporting children to activities. These consumers would value a portable snack that could be eaten on the go. Those factors led Rahal and Smith to focus on developing a nutrition bar. It was the perfect grab-and-go health food to take to market. “Bars save time, and that’s what it came down to,” Rahal says. “The customers we were targeting place a tremendous value on anything that can save them time.”

In November 2012, Rahal and Smith co-founded Chicago Bar Co. LLC, settling on RxBar as its “doing business as” name and brand. The company was basement startup -- literally. “We started out making the bars by hand in my parents’ basement,” Rahal says. “We started out with three flavors: coconut, chocolate and blueberry.”

The original RxBars were packaged in wrappers designed in Microsoft PowerPoint and sold door to door. Rahal took to the streets of the Chicago area and began networking with the owners of food stores and gyms. With few resources at the outset, the door-to-door approach was born both out of necessity and a desire to separate RxBar from the pack in a crowded health-food space. “We wanted to emphasize that our product wasn’t just a ‘me, too,’” Rahal says. “We weren’t just another protein bar on the market. We were selling something different, and we believed consumers would respond to it.”

That approach not only worked, it lit the fuse for explosive growth. In a little more than a month after launch, their operation had outgrown the basement, and the pair moved their fledgling company into an external production space. By April 2013, six months after starting the company, Rahal and Smith were generating a steady revenue stream.

RxBars ingredients
RXBARS use straightforward messaging on their packaging to reflect simple ingredients.
(Photography by Sara Stathas)

Five years later

In the first year, RxBar produced 200,000 bars out of a basement, then from a small production facility. By the end of 2017, Rahal estimated that the company would have produced 105 million bars during the calendar year. The company is now a nationwide operation, headquartered in Chicago, with a production facility in Southern California and a national customer base.

The company also has a new owner. In fall 2017, Rahal and Smith helped engineer the sale of RxBar to Kellogg’s for approximately $600 million. The sale brings Kellogg’s vast resources to RxBar, while still allowing Rahal and Smith to operate the business with a high degree of autonomy. “We were looking to begin the next chapter for the business,” Rahal says. “When Kellogg’s came along, we felt we had found the right suitor. Kellogg’s can help us with some of the challenges that arise with high growth. They bring a large pipeline of potential business, a high profile and innovation.”

Long term, Rahal wants to take RxBar beyond its health-bar niche. He wants to turn RxBar into a health food brand, helping Kellogg’s further strengthen its presence in the health food space. “We want RxBar to become a platform, not just a bar company,” Rahal says. “It comes back to the fact that we don’t just want this company to be a ‘me, too’ brand in the health-food space. We want to continue developing this business as something unique, providing something that customers really want.”

“You work hard, you make well-researched decisions, you find good partners and you hire good people.” —Peter Rahal, co-founder and CEO, RxBar

Human fuel

Along with growth comes the need for people who can help sustain that growth. RxBar began as a two-man operation but has since expanded to 75 people, mostly based in the Chicago headquarters. Without great people providing the fuel for growth, Rahal says the company’s phenomenal success in its first five years would not have been possible.

“It’s a stimulating environment, where you really take ownership of your work,” Rahal says. “Your fingerprints are going to be all over your work, so you have to want that ownership, that autonomy and that willingness to accept a certain level of risk. And we have those kinds of people.”

Rahal and Smith give employees ownership and a high level of autonomy with a flat organizational structure. They push authority down to the department and team level, giving individuals more latitude to operate, and they do so while maintaining a strong corporate culture. Rahal says they do that with consistent hiring practices and alignment on core values.

RXBARs team.
Rahal and Smith give employees ownership and a high level of autonomy with a flat organizational structure.
(Photography by Sara Stathas)
“You definitely hire to it,” Rahal says. “You have to be aligned on values and trust that your people will operate to those values and make decisions based on those values without having to look over their shoulders all the time. If you hire the right people at the outset, you have a much greater trust factor on a day-to-day basis.”

With five years of success under the company’s belt and now the backing of Kellogg’s, Rahal wants to continue the expansion of the RxBar business and brand. He can’t say for certain where the business will be in five years, but he has some goals in mind. “Five years is a long time, but looking into the future, I’d like for us to be a growth engine in the Kellogg’s organization,” Rahal says. “I’d like to see us be at 150 or 200 employees by then. I’d like to see us expand our reach in our various distribution channels, including grocery, health clubs and e-commerce. “We’ve always had a vision for this company, and realizing that vision is about doing a lot of basic things very well. You work hard, you make well-researched decisions, you find good partners and you hire good people. We’ve been very fortunate that we’ve been able to do all of those things, and we plan on continuing to do so.”

A helping hand

RXBAR has been growing for five years, but that growth has been especially great the last two years, up to and including its 2017 acquisition by Kellogg.

Co-founders Peter Rahal and Jared Smith launched RxBar with a four-figure investment from each of them, avoiding the need for outside investment capital and allowing the pair to retain total control of the company. But in 2016, they realized they needed the financial resources to support continued high growth. Their success made RxBar an attractive customer for banks throughout the Chicago area, but Rahal and Smith were looking for something extra in a bank. They wanted bankers who would learn their business, understand their needs and act as advisors. They found what they were looking for at Huntington.

“As we grew, we needed assistance with a line of credit,” says Jim Murray, RxBar’s CFO. “We reached out to a bunch of different banks in the area, and when we met with Huntington, we just felt really good about it. We felt the cultures of our two companies meshed really well.”

RxBar now utilizes numerous Huntington services, including a line of credit, credit card services and a merchant account. “They’re our primary bank now,” Murray says. “We work together very well. They’ve gotten to know us and our organization through frequent communication. They help us think things through before we make any decision about our future growth. It means everything to have a bank that is willing to work with you like that.”

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