The owner of a snacks company has shared how a $220 million (£171 million) mistake resulted in a $5 billion (£3.9 billion) return.
Daniel Lubetzky founded Kind Snacks in 2004, and there’s a good chance you’ve tucked into the company’s products.
Here in the UK its range of high-protein, high-fibre snack bars are commonplace in supermarkets, vending machines, and stacked on the counter at your local gym.
While the brand has grown into a household name, there were plenty of speed bumps along the way.
Back in 2008, the company was still gaining traction in the market, underpinned by a $16 million (£12.4 million) investment from VMG partners.
Within that investment contract was a clause stating that Lubetzky had to sell the company within five years and, four years in, Kind’s growth and positioning made it clear he wanted to stay with the company.
"Four years into the deal, I was realizing that Kind could become so much bigger," he told CNBC.
"My investors were pushing me to sell the company, and were very eager.
"My vision was to continue growing the company for many years to come. And their vision was to exit and get a return on their investment."
He thus had two options: stick to the plan and sell the company, losing out on a massive and increasingly successful project, or buy VMG out of the contract.
However, in order to do the latter, he needed to find $220 million and, in the process, risk losing everything.
"I had a very strong feeling, informed by our momentum, that this was not the end - nor the beginning of the end - but the beginning of the beginning,” said Lubetzky. “And I wanted to keep going.
"But that was a scary moment. What if something goes wrong? Then, all of a sudden, you have so much debt, and you could maybe even lose your company.”
Taking on the risk, Lubetzky forged ahead with buying VMG out of the equation, but it was a challenging path that saw negotiations run until 2014.
However, the risk was worth the reward. Sales doubled in 2014 and in 2020, six years later, Lubetzky went on to sell the brand to Mars in a deal that was reportedly worth $5 billion (£3.9 billion).
Despite that massive windfall, and validation that the risk was worth taking, Lubetzky still has a hand in how Kind operates.
"I am still a meaningful stakeholder in Kind today, and I still guide them," he explained.
"We’ve agreed with our partners at Mars that Kind will be a separate standalone platform, and Kind is still growing by double digits.
"It’s not just about me having achieved more financial success with this path. There is a possibility that Kind would have not reached the tens of millions of consumers that it reaches every day now."
Sometimes you really do have to speculate to accumulate.
Featured Image Credit: Christopher Willard via Getty ImagesTopics: US Food
Rachael Davis